Taxation of winnings for players (USA)

In the United States, any gambling winnings are taxable income: casinos, online casinos, sports betting, lotteries, poker, bether, fantasy competitions, sweepstakes, horse racing bets, etc. The tax is taken into account regardless of whether you received money in cash, in an account, in cryptocurrency or in the form of a prize (for example, a car is taxed at market value). Below are key rules, reporting thresholds and practical advice.

1) What exactly is taxed

Cash winnings: slots, board games, poker tournaments, sports betting, lotteries, etc.

Non-cash prizes: subject to fair market value (FMV) on the date of receipt.

Online winnings: same rules as offline; for regulated states, the operator usually keeps records and can issue forms.

2) Thresholds for W-2G form (informing player and/or retention)

The operator/organizer can give you a Form W-2G when the set thresholds are reached (does not mean that smaller amounts are not taxed - they are also taxed, just without a form):

$1,200 + - slot wins and bingo (win amount).
$1,500 + - keno (including bid).
$5,000 + - poker tournaments (net win: prize minus buy-in).
$600 + and at least 300-fold bet - for some lotteries/draws/bets (horse racing, etc.).
Sweepstakes/lotteries/pools often have a $5,000 threshold for mandatory federal retention.

💡 Even if the W-2G was not issued, you must independently declare all winnings in the tax return.

3) Deductions from large winnings (federal level)

The standard federal deduction from "deductible" winnings is usually 24% (usually with amounts of $5,000 + and corresponding types of winnings).

If you have not provided SSN/ITIN or otherwise, an increased rate reserve hold may apply.

The actual final rate on the declaration may differ - the deduction is an advance, the result is specified in your annual 1040.

4) How to report in a declaration (Form 1040)

All winnings are included as "Other income" (Form 1040, Schedule 1).

Losses can only be counted against line-item deductions (Schedule A) and only within the amount of winnings.

For professional players (activities as a business), different rules for accounting for expenses (Schedule C) apply, but professional status requires sustainable business activities and has different tax consequences.

5) Loss deductions and accounting

Losses cannot create a loss below zero in gambling activity for an amateur: the maximum is to "zero" the winnings.

Keep a detailed log: date, place/site, game type, bet/win/lose amounts, tickets, receipts, bank/wallet statements, screenshots of game history.

For online accounts, save the statutes for the year and upon request from the operator.

6) Nonresident aliens

Typically, a 30% federal deduction on winnings (unless otherwise provided by your country's tax treaty).

The presence of a tax convention can reduce the rate or give an exemption for certain types of winnings - ITIN and correct registration will be required.

Declaration - via Form 1040-NR; part of the deductions can be refunded for documented losses if the convention/rules allow it (not for all countries and situations).

7) State and local taxes

Many states impose winnings in state income taxes (rates vary).

Some states do not levy income taxes (e.g. Florida, Nevada, Texas, etc.), but if you are a resident of another state, you may be expected to be taxed at your place of residence.

In some cases, the operator holds state withholding - this is read when filing a state declaration.

8) Sports betting, fantasy and crypto

Sports Betting/DFS: Earnings are considered income; free bets/credits are counted according to the rules of the state and the terms of the promo - in the declaration, reflect the net result according to the forms and statutes.

Cryptocurrency: if the prize is issued in crypto, the market value in USD is taxed on the date of receipt; further crypto movements are already separate capital-gain/loss events.

9) Practical player checklist

1. Collect W-2G (if issued), account statutes, checks, statements.

2. Keep a log of the game (especially with numerous online sessions).

3. Check if there were federal/state deductions and report them on the declaration.

4. Decide if it's a line-item deduction or a standard one: losses only count toward the line-item approach.

5. Assess the resident/non-resident status and the existence of a tax convention (for non-residents).

6. For large amounts - calculate quarterly advance payments by federal and, if necessary, by state.

7. Keep documents for at least 3 years (preferably 5-7 for safety reasons).

10) Frequent errors

"No W-2G means no taxes." Incorrect: everything is taxed, the form is only a notification/information.

Incorrect accounting of bonuses and freebets: at the end of the year it is important to reduce to a net result according to the operator's reports and state rules.

Lack of ITIN/SSN for non-resident winnings → unnecessary deductions and difficulties with refand.

Ignoring state taxes if the resident does not live where he won.

Mixing gambling losses with other expenses - this is not allowed for an amateur.

Disclaimer

This is a generalized information statement, not an individual tax consultation. State norms and reporting/withholding thresholds may vary. To fine-tune reporting and deductions, contact your tax advisor or review the current IRS/state guidelines before filing your return.