Are Blackjack Winnings Tax-Free?

by Michael Wolfe ; Updated July 27, 2017

Depending on a person's luck and skill, gambling can occasionally function as a source of income. Whether the game is blackjack, seven-card stud or five-card draw, any money a player wins is subject to taxation. According to the Internal Revenue Service, a gambler must declare all winnings on his income tax return.

Legal Requirements

Blackjack winnings are subject to the federal income tax and, in some states, a state tax. On a federal tax return, you must report gambling income on Line 21 ("Other Income") of IRS Form 1040.

If you received any other form of compensation as a result of gambling — such as prizes, or comps issued by a casino — you must state its value and report it as income.

Deductions

To offset the taxes applied to gambling winnings, you may list your gambling losses as a deduction on your tax return. Unlike most other deductions, gambling losses are not subject to the 2-percent limit on Form 1040, Schedule A. However, the total amount of losses you deduct cannot exceed your total winnings.

To deduct losses legally, you must keep an itemized record of your winnings and losses. For instance, you could keep a diary that records the details of your specific wagers; the name of the gaming establishment; its address; and the names of people who accompanied you.

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Lumping

The IRS states that players who file tax returns are not allowed to "lump" their wins and losses (i.e., subtract the amount lost from the amount won and declare this figure as income). Players must declare their losses and winnings separately.

Documentation

To substantiate your itemized record, you must be able to provide the IRS with documentation that confirms your winnings and losses. These can include wagering tickets or receipts; canceled checks; bank account and credit card records; and casino statements or receipts. You do not need to submit these documents with your tax return, but you must have them available in case the IRS chooses to audit you.

Casino Reporting

In many cases, casinos will issue IRS Form W-2G to gambling winners, who must use it to report their winnings. You will normally receive a W-2G form if you won more than $600 in state lotteries, horse racing, dog racing or jai alai (provided your winnings were at least 300 times your wager); more than $1,200 from bingo and slot machines; or more than $1,500 from keno, after subtracting the amount spent on tickets. However, winners of table games such as blackjack do not receive W-2Gs, regardless of the amount they win.

About the Author

Michael Wolfe has been writing and editing since 2005, with a background including both business and creative writing. He has worked as a reporter for a community newspaper in New York City and a federal policy newsletter in Washington, D.C. Wolfe holds a B.A. in art history and is a resident of Brooklyn, N.Y.

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