If you’ve gotten lucky at games of chance or showed off your skill playing poker at an Ohio casino, there’s a lot to think about. One of them is taxes. Winnings from gambling, no matter if they come from betting on horses, lottery tickets, poker games, slot machines, or table games, are all taxable income. That applies if you won a non-cash prize like a boat or a car as well. You must report your gambling winnings and ensure you’ve paid the correct percentage.
Gamblers may have questions about how to report those winnings, whether they can deduct anything related to gambling, and how much to pay. The answers, specific to Ohio, are here.
How much are my gambling winnings taxed?
Typically, gambling companies withhold 25% of your winnings if they have your tax information, like your Social Security number. If they lack that information, they may withhold as much as 28%. That may cover your tax liability, but it also may not. What rate you pay to both the IRS and the state of Ohio depends on your total income for the calendar year from all sources. Both have graduated tax schedules, which means you pay a higher rate as your income increases.
The new regular withholding rate
Starting with the tax year 2017, the IRS has a withholding rate of 24% applicable to winnings of $5,000 or more from the following:
- Certain parimutuel pools
- Jai Alai
- Wagering pools
Federal Form W-2G, certain gambling winnings
If you’ve won money or prizes gambling, the entity that paid you is responsible for sending you a Form W-2G, Certain Gambling Winnings. This form alerts the IRS and you of your winnings from that source for the appropriate tax year. To trigger this requirement, however, you must have won cash or prizes above certain thresholds. Those are:
- The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine
- The winnings (reduced by the wager) are $1,500 or more from a keno game
- The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament
- The winnings (except winnings from bingo, slot machines, keno, and poker tournaments), reduced by the wager, are $600 or more, and at least 300 times the amount of the wager
- The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding)
Note that these are cumulative amounts throughout the year. So, for example, if you net $200 playing slots at the same casino three times during a calendar year, that gets you up to that $600 reduced by the wager level. Additionally, if you have gambling winnings from more than one casino, racebook, etc., throughout the year, you should get a separate Form W-2G from each. Once you have all the Form W-2Gs you need from the past year, you can report your winnings.
How to report OH gambling winnings on taxes
There’s no benefit to not reporting your gambling winnings as income. In many cases, the withholding already took care of your liability. In that situation, there’s no benefit from trying to hide your winnings because you’ve already paid the tax. All you’d be doing is putting yourself at risk of an audit. The same thing goes for underreporting.
Once you have all the pertinent Form W-2Gs, add up all the figures in Box 1. That total goes down as “Other Income” on your IRS Form 1040, Schedule 1. It also goes on your Form 1040 as Other Income, on Line 7a. That may not be the only qualifying source of Other Income, so if you have other qualifying income, add those figures to your gambling winnings.
The W-2G forms also have figures in Box 4. This is the amount that was withheld from your winnings for tax purposes. Again, add all of them up. Combine that total with the rest of your IRS withholding amount on Line 17, “Federal Income Tax Withheld.” Attach your Schedule 1 to your 1040. At this point, you’re done reporting your gambling winnings to the IRS. Keep all your W-2Gs for your records but do not attach any of them to your return.
Ohio state taxes for gambling
State law in Ohio requires casinos to withhold 4% of your winnings for state income taxes. You may still be responsible for paying any amount due, depending on what your total ordinary income for a tax year is. The OH Dept. of Taxation has six graduated levels for tax year 2020. They are:
- $0-$22,150: 0%
- $22,151-$44,250: $316.18 plus 2.85% of the amount in excess of $22,150
- $44,251-$88,450: $946.03 plus 3.326% of the amount in excess of $44,250
- $88,451-$110,650: $2,416.12 plus 3.802% of the amount in excess of $88,450
- $110,651-$221,300: $3,260.16 plus 4.413% of the amount in excess of $110,650
- $221,301 and above: $8,143.14 plus 4.797% of the amount in excess of $221,300
You should report your taxable winnings on Form IT 1040. The total from Line 11 of your Federal 1040, which includes your gambling winnings, goes on Line 1 of your Ohio IT 1040. If you have any Form W-2Gs that show an OH and an eight-digit number in Box 13, you will need the amount in Box 15. If Box 13 shows a state other than OH, do not include the amount in Box 15 from those W-2Gs for your state return. The total of all your Ohio state income tax withheld from all your relevant W-2Gs goes on Line 14 of your Ohio IT 1040. Again, do not attach your W-2Gs to your return.
Finally, several municipalities in Ohio levy local income taxes. An example is Columbus residents and workers have an additional 2.5% local tax on their income. You will have to pay these taxes on all your gambling income, just like you would any other income. Contact your municipality for the correct forms and for guidance on how to fill those out correctly.
What if I don’t receive a Form W-2G?
If you didn’t get a Form W-2G, that doesn’t alleviate your responsibility to report your gambling winnings and pay any amounts due. The first thing to do is to contact the entity you believe owes you one of these forms. There may have been some error in recording your address, for example, that prevented the form from reaching you. Again, there’s no benefit to underreporting. You risk facing fines and interest.
Do I have to pay taxes if a group of people wins the lottery?
If you are part of a pool that buys a winning Ohio Lottery ticket or go in with some friends on a clever bet on a horse race, the IRS has a specific form and procedure. That is Form 5754. Unlike Form W-2G, this is a form that you must fill out. It tells the gambling company the pertinent details of every person in the group. Using that information, that entity can then get a correct W-2G to each person.
After making copies for everyone in the group and turning it into the gambling provider, keep the form for your records. Do not attach it to your federal, local, or state returns.
Are there any deductions available for taxes related to gambling?
You can deduct your gambling losses from your taxable income for the IRS, but not the state or Ohio municipalities. To utilize this federal deduction, you must opt to itemize your deductions. If you take the standard deduction, that nullifies this option. Use Schedule A, Form 1040 to itemize deductions. Your gambling losses go on Line 28.
There are a few things to note here, though. First, you can’t deduct more than you won during the year. That applies even if you ended up showing a loss for the year as a whole in terms of your gambling. You also cannot deduct expenses related to gambling. If you stayed at a hotel, got a meal, enjoyed some beverages while you were playing, etc., those are not gambling losses.
Another important note is your gambling losses are not the difference between what you spent and what you won gambling for the year. The only amounts you can deduct are your actual losses, up to the point of the winnings you collected. If you opt to do this, keep detailed records. Examples include:
- Wagering tickets
- Credit or debit card receipts
- Bank statements
- Casino loyalty/rewards statements
How to claim gambling winnings and/or losses
Both the IRS and the Ohio Dept. of Taxation have resources for taxpayers who may have questions. When you access these resources, have all the information you can ready in order to streamline the process. That can include your Form W-2Gs, your personal information, and proof of any gambling losses you might want to deduct. For help with your state return, check out the Self Help eLibrary. You can find an IRS Taxpayer Assistance Center Office here.
Taxes on multistate lotteries
As the OH Lottery participates in these games, such as Mega Millions and Powerball, prizes won playing them are considered local income. Thus, you’ll have to pay all the same taxes you would on the cash you win playing an Ohio-specific lottery game. As far as municipal governments, the OH Dept. of Taxation, and the IRS are concerned, it’s all the same.
What happens if you win a few thousand dollars on a winning OH Lottery ticket?
If you get lucky playing an Ohio Lottery game, the procedure is similar to any other form of gambling. The lottery will send you a Form W-2G if you win a prize of $600 or more. The lottery will withhold taxes from your prize according to federal and state law. In this instance, it would be wise to talk to an attorney and accountant. They may be able to come up with strategies to help you minimize your tax liability.
What if all or part of my gambling winnings aren’t cash?
Non-cash prizes won in sweepstakes or via other games are considered taxable. The entity granting the prize should submit a federal form 1099 with your tax information stating the fair market value of the prize. That amount goes on Line 21 of your federal Form 1040. On your OH IT 1040, you would report it as you would cash winnings, again, using the amount shown on the 1099 you got from the payor.