Gambling Taxes Explained: A State-by-State Guide for Online Casino Players

Playing online casino games for real money means paying taxes when you collect winnings. This is especially poignant for people in Michigan, New Jersey, Pennsylvania, and West Virginia, as residents of and visitors to these states have access to many of the best legal casino apps. Policies and procedures related to the Internal Revenue Service are identical across all of these states, but there are nuances to how these four states handle gaming-related transactions on state income taxes. In most cases, proper reporting is simple.

According to the Internal Revenue Service (IRS), "gambling winnings are fully taxable and you must report the income on your tax return." However, the IRS makes a distinction between "casual gamblers" and "professional gamblers."

The IRS defines a professional gambler as someone who gambles "in continuity and regularity, aiming to produce income for livelihood." Everyone else, in the view of the IRS, is a casual gambler.

For non-professional gamblers, an important distinction is that the IRS taxes winnings, not profit. Even if you spent more than you won on your gaming throughout the course of a tax year, your winnings are still taxable income.

Taxable income related to gaming includes non-cash experiences and items as well as cash prizes. If you win a vehicle or trip, for example, you are taxed on the fair market value of the prize.

The IRS does allow taxpayers to deduct gambling losses if they itemize their deductions on their income tax returns. However, players may not deduct more than they won during the tax year.

If your winnings meet certain thresholds, the entity you gambled with is required to issue you a Form W-2G. However, not receiving a W-2G does not alleviate taxpayers of their responsibility to accurately report their gaming winnings and pay any amounts owed.

If you take advantage of the BetMGM Casino bonus code offer and have some winnings to report, the good news is that BetMGM will automatically withhold the required 24% and send you a Form W-2G at the end of the year to demonstrate those withholdings.

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At the same time, players should not assume that those withholdings completely satisfy their tax obligations on winnings. Additionally, a Form W-2G is for you to help you with accurately reporting your winnings. It does not alleviate you of your responsibility to report those winnings on your income tax return.

If you have any questions about the impact of your gaming on your federal income taxes, your best resource is a licensed CPA or tax attorney in your area. Accurate reporting and correct payments are the best way to avoid audits in the future.

Michigan, New Jersey, Pennsylvania, and West Virginia all tax residents' income. Non-residents who take advantage of online casino bonus codes may owe tax on gaming winnings in these states as well.

Each of these four states has slightly different policies for gaming activity. Tax rates vary from state to state as well.

The Michigan Dept. of Treasury's policies for gaming income mostly mirror the IRS' standards. Michigan is one of only a few states that allows casual gamblers to deduct their gambling losses from their state income taxes.

Michigan employs a flat income tax rate of 4.25%. The rate is the same for non-residents who have Michigan income, but whether you need to file a non-resident Michigan income tax return depends on which state you reside in and whether your state of residence allows for a tax credit for any tax paid to Michigan.

People who have questions about individual income taxes in Michigan can call 517-636-4486. Other recommended resources for Michigan online casinos include licensed CPAs and experienced tax attorneys.

The New Jersey Treasury's Division of Taxation treats lottery winnings differently from all other forms of gaming winnings. Otherwise, the policies are similar to the IRS' rules.

For New Jersey online casino winnings, New Jersey levies a 3% assessment. That applies to both residents and non-residents.

If you are not a resident of New Jersey but have winnings from online casino play in the state, you may get credit for any tax paid to New Jersey on your state income tax return. Consult a CPA or tax attorney to determine whether that applies to you. If you have questions, the Division of Taxation has a contact form.

The Pennsylvania Department of Revenue treats gaming winnings as a separate class of income. For online casino winnings, both residents and non-residents face tax obligations.

Pennsylvania has a flat tax of 3.07% regarding this type of income. Pennsylvania also allows players to deduct gambling losses if they choose to itemize their returns.

People who are not residents of Pennsylvania but have winnings from online casino play in the state are best off talking to a licensed CPA or experienced tax attorney regarding their individual liabilities. The Department of Revenue also has a customer service center online for anyone who has questions about Pennsylvania online casinos.

The West Virginia Tax Division rules for gaming winnings mostly mimic IRS policies. That includes an allowance for taxpayers to deduct gaming losses.

Non-residents are subject to the same 4.82% backup withholding requirement as residents regarding winnings from online casino play. The West Virginia Tax Division also has a customer service center online.

People who take advantage of the Caesars Palace Online Casino promo code in West Virginia are encouraged to keep track of their gaming activity. This is easy to do via your transaction history in the WV online casino app.

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When you have gaming winnings in any state from any type of gambling, the safe play is to assume that your winnings are taxable and ensure that you have correctly reported them. Taking these precautions is preferable to undergoing an audit.

Derek Helling