Your dependent will have to file his own tax return, indicating that he can be claimed as a dependent on someone else's return. A single dependent under age 65 must file a return if any of the following apply: His unearned income was more than $1,050. Gambling winnings are unearned income. His earned income was more than $6,300. Amount of your gambling winnings and losses. Any information provided to you on a Form W-2G. The tool is designed for taxpayers who were U.S. Citizens or resident aliens for the entire tax year for which they're inquiring. If married, the spouse must also have been a U.S. Citizen or resident alien for the entire tax year. There’s a bigger picture here, as well. Maybe you never earned the money online. Maybe you physically travel overseas to play poker and do other types of gambling. Then you electronically stash the money in your bank account and head back to the U.S. You still have to pay. You must claim that money when filing your taxes. It’s still income.

Your gambling winnings are generally subject to a flat 24% tax. However, for the following sources listed below, gambling winnings over $5,000 will be subject to income tax withholding: Any sweepstakes, lottery, or wagering pool (this can include payments made to the winner(s) of poker tournaments). Required Reporting of Gambling Winnings. Casinos are required to report gambling winnings if they exceed a certain limit ($1,200 of slot machine winnings for example). Gambling winnings get reported on the first page of your tax return on line 21.

Gambling In America

If you've ever won a jackpot in Las Vegas, you probably know that your excitement diminishes at least a little when the casino throws a W-2G tax form in your face. In fact, if you don’t provide your social security number, the casino will automatically withhold up to 30% of your winnings. The same goes for lottery and horse racing wins above $1200. Yet when playing online, paying taxes isn’t always so black and white.

Americans who play at US-based online casinos will usually have to deal with withholding taxes just like in Las Vegas. Yet that only represents a small fraction of your entertainment options. When playing at licensed offshore online casinos or poker rooms, American players usually won’t hear the words taxes mentioned at all.

Sadly, it is never safe to assume that your winnings are ultimately tax-free. It is true that Americans who play at internet gambling sites outside of the USA won’t be subject to withholding taxes when withdrawing their winnings. Yet you may be required to report these gains when you file your taxes in April. The greatest determinant is the number, size, and frequency of your wins. The actual threshold varies from state to state and whether or not you are an amateur or professional. For more information on reportable gambling winnings visit the IRS guide: https://www.irs.gov/instructions/iw2g/ar02.html

Professional Gamblers

Whether or not you qualify as a professional gambler doesn’t solely depend on your performance at the tables. The main litmus test is the expectation and probability of profit in the eyes of the Internal Revenue Service. Your success and whether or not you have a regular job on top of gambling may also be factors.

With even amateur gamblers having to deal with taxes, professional gambling does have benefits. You can actually deduct your wins from your losses when your treat your gameplay as a business. No matter what your current status is and how often you play, it's best to keep tabs on your performance to develop strategies, stick to a budget, and simply know where you stand. You can find this tip sheet courtesy of the IRS: https://www.irs.gov/taxtopics/tc419.html

Whether or not the IRS can actually track your winnings is another matter entirely. Yet you should be aware of your obligations. With a huge budget deficit and ballooning debt, the federal government is looking to fill their financial holes any way they can. Between the NSA and modern forensic accounting practices, covering your digital tracks is more difficult than it used to be.

Tax Obligations Outside Of The USA

The United States is a bit of an outlier when it comes to taxing gambling winnings. In the United Kingdom, the government taxes the gross profits of casino operators rather than players. Canadians can play the lottery, live casinos, poker and online games without paying taxes unless they are a professional. Likewise, Australians and New Zealanders can also gamble tax-free. To put things in perspective, Americans do pay some of the lowest personal income taxes in the first world. Things tend to even out in the end.

Like anything else, interpreting the rules is always a matter of debate. Here's an interesting tax perspective for Canadians: http://business.financialpost.com/personal-finance/tax-expert-a-gamble-over-poker-winnings

Things To Consider

Keep in mind that Americans have to deal with both Federal and State taxes on most forms of income. Always keep basic records no matter how often you play or win. This will make things easier during tax season.

Accountants Have The Answers

No matter where you live, it's always best to discuss your personal situation with a licensed tax professional in your area. You can usually get a short consultation for free with complete confidentiality. It's the best way to play by the rules while minimizing your tax burden.

Gambling is fun. Taxes are not. Unfortunately, the two have to go together for anything to happen.

The truth of the matter is that for states like Michigan, the only real reason to legalize any form of gambling is the opportunity for tax revenue. Whether it be to pay for schools, roads, or some other unspecified project, most governments are always on the lookout for a new revenue stream.

Paying any taxes stings, to be sure. However, it’s important that you know how and when the taxman might come when you visit one of Michigan’s casinos. So, here is a guide for how taxes apply to Michigan gambling.

What is taxable in Michigan?

Throwing money around in a casino rarely seems like an official transaction. Whether you win or lose, the final disposition of your chips can often feel like a stitch in time.

Unfortunately, it’s not. All winnings that you realize in a casino are taxable as income, both on the state and federal levels.

So, you should be reporting those wins on your annual tax returns. Though many people scoff at the notion of reporting cash income to the government, it counts the same as income from a check or direct deposit in the eyes of the taxman.

Failure to report your gambling income could, in theory, land you in hot water with the Internal Revenue Service (IRS) or the state of Michigan’s tax office. In practice, those entities are unlikely to audit someone over a few hundred or thousand dollars, but that doesn’t mean that they can’t or won’t do so.

Also, please take note that non-cash winnings, like cars, boats, or other objects that you may win at a casino are subject to taxes too. The value that has transferred to you because of the win has increased your financial position, and the government wants its share of the loot. As a side note, game show prize winners have to do the same thing.

What taxes will I have to pay in Michigan?

Now that you’ve steeled yourself to the reality of giving away a portion of your sweet winnings to the government, you may be wondering who and what you’ll be forced to pay. As indicated earlier, you will be compelled to pay percentages to both the IRS and the state of Michigan for your wins there.

The IRS, for its part, will demand that you fork over 25% of your winnings to the feds for your troubles. This rate applies to wins of any size, so even if you win just a dollar, you’ll still need to throw a quarter at the taxman.

In addition, Michigan law requires that you pay an additional 4.25% to the folks in Lansing for having played in their casino. Even though the casinos themselves are the main wellspring of tax income for the state lawmakers, gamblers do not escape unscathed.

For smaller wins, you’ll essentially be on your honor to report your gambling winnings to the appropriate authorities. As stated earlier, it’s not legal just to stick the money into your pocket, but there’s no mechanism or watchful eye to force your compliance as you exit the casino.

That lack of oversight extends to wins up to $5,000. However, at that point, the casino itself is bound to collect 25% on the government’s behalf before it releases your winnings to you. Give the cage your name and Social Security number, and your tax bill will be settled before you leave the property.

Obviously, losing 25% off the top is a kick in the teeth, but please don’t get any ideas about simply withholding your name and SSN. As it turns out, anyone who refuses to provide their information (for any reason) will be subject to an additional penalty of 3%.

Neither option is good, but bear in mind that the casino is not going to keep a cent of that money that it withholds. So, you might as well go along with it and live to fight another day.

If I never win $5,000, will I ever have to pay taxes upfront?

If you’re not a high roller, the idea of ever reaching the federal threshold for casinos to report wins might seem far-fetched. After all, if you usually bet in $5 or $10 increments, it’s quite unlikely that you’ll realize a win that exceeds $100, let alone $5,000.

So, you may be wondering if you’d ever have to worry about the feds ever knowing that you were gambling. Unfortunately, there are some other scenarios in which the casino might have to report your win to the IRS before handing you the proceeds from your hard-fought victory.

A casino must report a win to the IRS with Form W-2G if any of the following events occurs:

• The total winnings, or combined bet and profit, on a slot machine exceed $1,200.
• A player’s keno profit on a game is more than $1,500.
• A poker player wins more than $5,000 in a tournament.
• A game’s profit is more than $600 and is thirty times or greater than the bet amount.

Now, filing this form does not mean that the casino has to collect from your winnings automatically. However, since the government will soon be aware of your win, it would be foolish to omit it from your return. So, make sure to keep your copy of the form for your records.

The bottom line is that if you have a memorable win in a casino, it’s quite likely that the government wants to remember it, too.

How do I report my winnings?

It’s understandable that you might feel disappointed about having to pay taxes on your winnings. Nevertheless, in most cases, you’ll bite the bullet and decide to file. So, here’s how to do that.

As is the case for essentially anything to do with the IRS, there are forms to fill out. The first thing to do is report the income on the IRS Schedule 1, which is the form for additional income and adjustments to income.

On that form, look for Line 8 in Part I, which is entitled “other income.” Here is where you will list your winnings and their source. “Gambling” or “casino” are fine for explaining from where the money came in most cases, although you can be more specific regarding the casino and date if you’re worried about attracting attention.

Claiming Online Gambling Winnings On Taxes Returns

Once you’ve entered the information onto your Schedule 1, you’ll need to put the same total onto line 7a of your regular tax return. You will then be able to add the winnings into your overall taxable income.

By the way, your Schedule 1 is also the place to list various types of deductions, like certain business expenses or student loan interest payments. So, make sure that you don’t miss out on all the different ways to knock down that taxable base.

Can I report gambling losses in any way?

Of course, gambling comes with the inherent chance of losing. However, you could understandably think that it seems unfair that the IRS only cares about your winnings. You may wonder if there’s a way to claim gambling losses on your taxes.

As it turns out, you can.

The IRS provides Schedule A as a form to claim various deductions. Although there’s no line expressly for gambling losses, you can list your setbacks in Box 16 – Other Itemized Deductions to claim them.

Now, there are two rules that go along with claiming casino losses on your tax form. The first, and most important, is that you cannot claim losses in excess of your claimed winnings.

So, if you list $1,000 in gambling winnings on your Schedule 1, the maximum that you could claim as losses on your Schedule A would be $1,000. If you had a bad year at the casino (as many of us do), the IRS does simply allow you to write off the loss as a deduction against your taxable base, unfortunately.

The other rule is that you must be able to prove your losses in some kind of meaningful way in order to claim them. It is vital that you keep records, receipts, and other documentation to show the losses, or the IRS might not accept the deduction as valid.

After all, that might be a handy way to offset your winnings from the year and avoid taxation, so the IRS has to be sure that you took the beating you claim to have suffered. The chance that the agency will take a harder look at you will increase as the dollar amount goes up, so if you’re a bit of a high roller, it’s a good idea to keep a paper trail for yourself.

If you’re thinking that record-keeping might be a pain, you can possibly make things easier by using your loyalty or membership card at your casino of choice when you play. Since they award you based on your play, they keep records of your play. It shouldn’t be too difficult to acquire a copy of your history from the casino.

For your Michigan tax return, it is not possible to claim any kind of losses as a deductible expense. However, the state does allow you not to report the first $300 you win on bingo, poker, or other games from your total household expenses.

Do I have to pay taxes if I don’t live in Michigan?

It’s pretty clear that you have to pay taxes to Michigan if you’re a Michigan resident. However, you may be wondering if you’re still on the hook for the taxes if you’re just visiting from out of state.

Unfortunately, you are still bound to pay taxes to Michigan for your gambling win as a nonresident. As is often the case, there’s even a form for that. Worse yet, you will also have to report your winnings on your return for your own state, assuming that your state requires an income tax.

However, there are a couple of bits of good news. First of all, the states nearest Michigan (Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin) have reciprocal agreements with the Great Lake State regarding earnings that you incur in Michigan. If you live in one of those six states, you are not required to file a nonresident return in Michigan.

The other ray of sunshine is that there is, in fact, a tax credit that you will be able to claim on your home state’s return that will offset the taxes you paid in Michigan on your winnings. So, even though you had to fork over to a state in which you don’t live, you don’t have to pay double tax on the windfall. Although states are happy to collect tax revenue, they correctly realize that having to pay tax twice on the same win might lead citizens to decide it’s not worth the effort to play.

Do I have to pay taxes if I’m part of a group?

In many things, there is strength in numbers, and gambling is no exception. It’s not uncommon for a group of friends to pool their money so that they can roll a bit higher than they would individually. Whether they’re throwing in for a slot machine or on a lottery ticket, groups of people can often find themselves with a claim to a significant amount of winnings.

Claiming Online Gambling Winnings On Taxes Money

Unfortunately, taxes remain one of life’s surest things, and group wins are subject to taxation just as much as individual wins. As expected, there is a form for that.

Claiming Online Gambling Winnings On Taxes Jointly

If your group of friends scores big, you will need to fill out IRS Form 5754 to report the winnings for tax purposes. One of the group will have to designate himself or herself as the primary winner, and the other members of the group will have to note the share of the prize that they are claiming. So, if you hit it big with your buddies, you might need a calculator.

Claiming Online Gambling Winnings On Taxes Owed

Once you’ve got the form filled out, send it to the IRS. If the win occurs at a casino, casino management might want a copy of the form for its own records, too.