Are My Winnings from an Online Casino Taxable in New Jersey?The short answer is yes, your casino winnings in New Jersey are taxable, as the IRS (Internal Revenue Service) will also tell you. In this article, we will explore further details regarding the taxation of your casino winnings and how the IRS plays a role in this process. We will also discuss when you must report your winnings to the IRS.
Fast Facts about Taxation for players in NJ:
|Tax Forms to use when reporting wins:||Form W2-G issued by payer + either Form 1040 or 1040-SR under ‘Other Income’.|
|Tax Forms to use when reporting losses:||Form W2-G issued by payer + either Form 1040 or 1040-SR under ‘Other Income’.|
|Tax Form to use when reporting wins more than $5,000||Form W2-G issued by payer + either Form 1040 or 1040-SR under ‘Other Income’.|
|Federal Tax Rate:||24%.|
Are casino winnings taxed the same on land-based and online casinos in NJ?
Yes, all casino winnings, whether online or land-based, still fall under ‘Other Income’ and, therefore, attract the same taxation amounts. (3)
Are gambling taxes different from income taxes?
Yes, they are, since it falls under its own set of laws and rules. However, you report your Gambling Winnings as part of your Personal Income to use the forms correctly.
Do I have to report taxes on my winnings if I am a professional player?
Yes, but when doing your tax returns, you must complete Schedule C, not Schedule A, on Form 1040 or 1040-SR.
What information does the IRS in NJ need when verifying my taxation obligations?
Form W2-G issued by the payer of your winnings and your Form 1040 should provide sufficient information to the IRS to ensure all your payments are in order.
Can I deduct my gambling losses?
Yes, you can deduct your gambling losses, but only up to an amount equal to your winnings and only if you can provide receipts, tickets, statements, or other records that show both your winnings and losses.
Is There a Unique Tax Rate in NJ?
The US operates using two taxation systems: Federal Tax and State Tax. Federal Tax is imposed by the government, whereas State Tax is only relevant based on specific states. Because state tax has different governing bodies, the percentage of tax you must pay varies from state to state.
Since 2018, Federal Taxes have a uniform 24% withholding rate, while New Jersey specifically has a 3% State Tax.
Highlights of the Federal and NJ Laws Regarding Gambling Winnings
Here are a few quick highlights about the Federal and State Laws regarding your gambling winnings.
Federal Law for Gambling Winnings
- All gambling winnings must be reported to the IRS.
- You can only deduct your gambling losses if you keep a record of both losses and winnings.
- Nonresident aliens use form 1040-NR for their gambling winnings reports.
New Jersey Law for Gambling Winnings
- Casinos are not required to issue form W2-G or withhold taxes on winnings from table games.
- Casinos instead expect players to keep track of these winnings.
- The same rules apply to sports betting.
When do I need to report my winnings?
You will report your winnings differently depending on the game you’ve played and won. Here are some examples:
|Game where you won||Amount exceed for reporting|
|Sports betting||$600 on a $2 wager or 300x any larger amount wagered.|
|Horse racing||$600 on a $2 wager or 300x any larger amount wagered.|
|Keno||$1500 reduced by winnings.|
|Poker||$5000 reduced by wager or buy-in from the tournament.|
How do I report my winnings in this case?
Here is what you should know regarding how to report your winnings in any of the above cases:
- You need a copy of any W-2G forms issued by casinos that paid you any winnings.
- You must then file the amount of the winnings on either Form 1040 or 1040-SR under ‘Other Income’.
- You must file these forms by the 15th day of the fourth month following the close of the fiscal year.
Use this form if you are a Individual under 65 years old
Use this form if you are a senior 65 years or older
Do I always need to use the W-2G form?
You require form W-2G in any situation where you win enough through gambling that you must report it to the IRS for taxation purposes. Should any money be withheld or not go through a received W-2G form, you should file it as part of your tax return. (5)
In the events where you do not receive a W-2G form from the payer, it is your responsibility to keep track of your winnings as this is considered taxable income.
Reporting Casino Losses in NJ: When & How?
Any gambling losses are reported on either Form 1040 or 1040-SR. You can only include gambling losses up to the amounts won, and you MUST provide receipts, tickets, statements, or other records that show both your winnings and losses.
In which cases can I report my losses?
You can report your gambling losses within the following guidelines:
- Up to the amount you won during said financial year.
- You can combine losses from different games even if winnings only came from one game.
- Only if your winnings reach a taxable amount.
What documents do I need to present?
Documents you can present for reporting losses include:
- Betting tickets
- Win-Loss Statements from gambling establishments
Professional Gamblers: What are the rules for these players?
Professional gamblers still use Forms 1040 or 1040-SR but must complete Schedule C, not A, for the purposes of taxation on winnings. You would then name gambling as your business, deducting losses and other gambling-related costs as business expenses.
What Happens if I Do Not Report Any of My Winning or Losses?
You should always report your winnings and losses, as not doing so can prompt investigation from the IRS in the form of a Notice of Underreported Income and can lead to you being charged with offences. Should you expect forms such as W-2G from an establishment and not receive it, you should keep track of your winnings and losses on your own.
Takeaway on The Taxation for Players on Casino Winnings in NJ
So, there you have it. All the details regarding how to manage your tax, whether you’re a casual or professional gambler: always remember that regardless of whether you play online or offline, you must adhere to the strict taxation laws of New Jersey and the US. Be certain to select a legal NJ casino by choosing a site from our list here.
Always remember to gamble responsibly and take the time to make sure you do your taxes correctly.
Resources & Sources
- Topic No. 419 Gambling Income and Losses, Accessed 28 June 2022 <https://www.irs.gov/taxtopics/tc419>
- State Income Tax vs. Federal Income Tax: What’s the Difference? Accessed 28 June 2022 <https://www.investopedia.com/ask/answers/060515/what-difference-between-state-income-tax-and-federal-income-tax.asp>
- IRS TAX TIP 2002-53 GAMBLING INCOME AND EXPENSES, Accessed 28 June 2022 <https://www.irs.gov/pub/irs-news/at-02-53.pdf>
- New Jersey Income Tax – When to File and Pay, Accessed 28 June 2022 <https://www.state.nj.us/treasury/taxation/njit27.shtml#:~:text=File%20and%20Pay-,New%20Jersey%20Income%20Tax%20%2D%20When%20to%20File%20and%20Pay,close%20of%20the%20fiscal%20year>
Form W-2G, Accessed 28 June 2022 <https://www.irs.gov/pub/irs-pdf/fw2g.pdf>