Pennsylvania Gambling Tax Calculator
Here’s an example and look at what your state and federal withholding would be. Keep in mind that with both the calculator and the following example, this is your estimated tax responsibility. Let’s say you are a single PA resident whose 2019 income was $55,000. Your tax rates would break down this way:
|Tax Type||Marginal Tax Rate||Effective Tax Rate||2019 Taxes|
Marginal tax rate is the bracket your income falls into. Effective tax rate is the actual percentage you owe after standard deductions (or if you itemize your deductions). The local tax rate in PA ranges from 0 to nearly 4%, depending on where in the state you live, with 1% used in this example.
When casino winnings are combined with your annual income, it could potentially move you into a higher IRS tax bracket, so it’s important to be aware of gambling income during tax preparation.
Are Gambling Winnings Taxable in Pennsylvania?
All gambling winnings are taxable. That includes winnings from sports betting, casino games, slots, pari-mutuel racing, poker and lottery. Depending on the amount of your winnings, your casino, online sportsbook or online poker site may have already withheld federal tax, which will be indicated in a W-2G form mailed to you and sent to the Internal Revenue Service. Even if you didn’t receive a W-2G form and the operator did not withhold taxes, it is your responsibility to report all gambling winnings on your tax returns.
In addition to federal tax, Pennsylvania assesses its own personal income tax on gambling income.
What are the Gambling Tax Rates for PA?
Generally, gambling winnings are subject to a 24% federal withholding tax, which is automatically deducted from winnings that reach a specific threshold (see next section for exact amounts), though that is an estimated tax and the actual amount you will owe will depend on your tax bracket.
In addition, the state of PA charges a flat 3.07% tax on income, which includes casino winnings.
How to Claim and Report PA Gambling Winnings for Taxes
Depending on the amount of your winnings, you may receive a W-2G form, which is sent by the payor (casino, racetrack, poker site, etc), typically in late January. The form indicates the amount of your winnings and if any tax was withheld. A copy of that W-2G is also mailed to the IRS. Expect to receive a W-2G if your gambling winnings exceeded any of these thresholds the previous calendar year:
- More than $5,000 from poker tournaments (reduced by your buy-in amount)
- $600 or more from any pari-mutuel race (horse racing, etc.), provided the payout was at least 300 times the wager amount
- $1,500 or more from a keno game
- $1,200 or more from slot machines or bingo
Even if you don’t receive a W-2G form, you are required to report the full amount of gambling winnings as “other income” on Form 1040, Schedule 1, Line 8. If your winnings were non-cash prizes, the IRS instructs you to report the fair market value of each prize.
In addition to your federal tax return, include gambling winnings on your PA-40 personal income tax return. Gambling income is placed on line 8 of Schedule T.
What if you’re a PA resident and your gambling winnings were derived from another state? PA law says that all winnings are still subject to the PA state income tax and must be reported, with the exception of non-cash prizes from the Pennsylvania lottery.
What To Do if You Don’t Receive a Form W-2G
You will not receive a W-2G if your winnings didn’t meet the automatic withholding threshold. But those winnings are still considered taxable income and must be reported on Form 1040 (Schedule 1) and your PA-40 state tax return (Schedule T).
The IRS expects you to keep an accurate account of your betting activity and may require you to substantiate wins and losses. Note that if you wager online, your sportsbook or racetrack betting provider generally provides a record of all your wagers that you can easily access. When wagering at land-based sportsbooks and racetracks, bettors should keep an accurate diary of all their wagers, wins and losses.
Can I Deduct My Losses?
The good news is, you can. The bad news is, your deductible losses cannot exceed your winnings in any given year. So if you had $3,000 in winnings and $10,000 in losses, your deduction is limited to $3,000. The remaining $7,000 cannot be carried forward.
And, gambling losses can only be deducted if you itemize deductions on your tax return (Schedule A, line 28 of Form 1040). That means if you claim the standard deduction (as an estimated 90% of households do), you cannot reduce your tax by deducting gambling losses.
If you do itemize your deductions, record-keeping again becomes vitally important. To substantiate gambling wins and losses, your documentation should include:
- Form(s) W-2G
- Wagering tickets/payment slips with dates, location and amount won/lost
- Canceled check or credit records
- Receipts from gambling facilities
PA Lottery Taxes
Having a winning ticket in the Pennsylvania lottery is taxable. If your winnings are at least $600, you will receive a W-2G form. If the prize is over $5,000, the PA lottery will automatically withhold the minimum amount of applicable taxes.
For bigger payouts, the PA lottery will offer a choice to collect winnings in a lump sum or annual annuity payments. A lump sum is more likely to place you in a significantly higher tax bracket, but these decisions are complex and should be made in consultation with a trustworthy tax attorney/financial advisor.
What Happens if I Win the Lottery With a Group of People?
This is not a rare occurrence. According to the PA lottery website, individual checks can be issued for prizes of $50,000 or more, as long as each individual’s share exceeds $2,500.
The PA lottery will ask the winning ticket holders to complete IRS Form 5754, in which all of the individuals and the amount of their winnings are listed. The lottery commission then prepares a W-2G form for each winner, listing the amount each receives. All W-2G forms are submitted to the IRS, which expects each winner to report the money shown on the form.
Taxes on Multi-State Lotteries
Also taxable. According to the PA Department of Revenue, multi-state lottery prizes, such as Mega Millions and Powerball, purchased from PA lottery vendors “are considered a prize awarded by the Pennsylvania State Lottery. Such prizes are considered Pennsylvania source income and both residents and nonresidents are subject to tax on such income if the prize is a cash prize.”
Winnings are subject to both federal and state taxes. One small consolation is PA’s 3.07% state tax on lottery winnings is less than half than neighboring states such as New York (8.82%), New Jersey (8.0%) and West Virginia (6.5%).
What Happens If I Don’t Report Gambling Winnings?
Your tax bill could become a lot worse, with possible penalties and interest payments added on. Keep in mind that if you received a statement of winnings on Form W-2G, the Internal Revenue Service also has a copy. If you do no report those winnings, the IRS could tell you to report them, or add interest and penalties to your tax bill.