Pennsylvania Gambling Laws and Taxes
Pennsylvania is one of the USA states with the fastest-growing gambling market and has made new records for gambling revenue. Most popular forms of gambling, including slots, bingo, casino games, horse racing, and others, are authorized by the PA gambling law. The law has even legalized online gambling.
Whether you won from playing table games, lotteries, horse racing, slots, jackpots, sports betting or other non-cash prizes, all the amount you win is considered taxable income and should be listed on your tax return each year. You can read further to know more about PA gambling law and tax on sports betting and online casinos.
Pennsylvania State Law and Tax for Gambling Winnings
If players fail to provide their Social Security number, their gambling winnings will be subject to the withholding rate of 28%. Whereas the casinos will withhold 25% of the winnings if gamblers provide their Social Security numbers.
Pennsylvania has a flat tax system and charges a 3.07% tax, the lowest of all the states, on taxable income, including gambling and lottery winnings. You can use PA-40 Schedule T to report your Pennsylvania taxable winnings.
New Withholding Rate
The sweepstakes, jai alai, certain parimutuel pools, wagering pools, and lotteries winnings of US$ 5,000 or more are subject to the new withholding rate of 24% under Section 3402(q) with effect from December 31, 2017.
Federal Form W-2G, Certain Gambling Winnings
The casino should send Form W-2G for reporting Certain Gambling Winnings to the players and the IRS. This form aims to inform them about the winning amount from gambling.
If the players reach the following thresholds, the payer should report the winning amount on Form W-2G.
- The slot machine or bingo game winnings, not reduced by the bet amount, are US$ 1,200 or more.
- The keno game winnings, reduced by the bet amount, are US$ 1,500 or more.
- The poker tournament winnings, reduced by the bet amount or buy-in, are more than US$ 5,000.
- Other games’ winnings, reduced by the bet amount, except for the winnings from keno, slot machines, bingo, and poker tournaments, are US$ 600 or more and pay at least 300 times the bet amount.
- The winnings at an online casino are subject to regular or backup withholding.
The players must report their winnings subject to federal and Pennsylvania income taxes even if the payer doesn’t send them Form W-2G. Online winnings are also taxable income and need to be reported.
Recipients Of Gambling Winnings
If the person receives winnings as a group member sharing the winning amount or for someone else, they should complete Form 5754. It will help your online casino prepare Form W-2G for each listed winner.
Gambling Losses Deductions for Taxes
Gambling losses can be deducted only up to your winning amount. You can itemize them on Schedule A, Form 1040. The deductions for expenses incurred on dinners, drinks, hotels, or other gambling activities are not allowed.
It is recommended to keep records of wagering tickets, payment slips, cancelled cheques, name and location of the bet, amount of winnings and losses, dates, and wager types while deducting for gambling losses.
To know about your past gambling activities, you can ask for the win or loss report from the casinos. Online casinos also provide the same report to their online players without any issue.
Gambling Winnings or Losses
A ten-minute interview with Pennsylvania Revenue Department can help the players determine how to claim their gambling winning and losses.
If the players have won the multistate lottery prizes for the games, such as Mega Millions or Powerball, then they will be awarded by the Pennsylvania State Lottery. It is important to note that lottery tickets must be purchased from the ticket vendor of the Pennsylvania state lottery with a valid license.
The Pennsylvania Department of Revenue considers such prizes as the Pennsylvania source of income, and residents and non-residents must pay taxes for the cash prizes. If the tickets are purchased from another state lottery vendor, the state lottery will give the multistate lottery prizes, and it will not be considered Pennsylvania’s source of income. So, only residents will be taxed for cash and non-cash prizes.
Pennsylvania Lottery Winnings Law
All Pennsylvania lottery winnings are fully taxable. When the Pennsylvania lottery winners win an item worth more than US$ 600, they will get a Form W2-G through the mail from the Pennsylvania authority. However, the winnings of their spouses should be reported separately.
Sports Betting and Taxes
According to the IRS, any income from gambling is fully taxable and should be reported on tax returns yearly. Gambling income includes winnings from online casinos, horse races, raffles, and lotteries, cash winnings, and the fair market value of the item won.
If the players win money from sports betting at the online casino, OTB or sports betting application, it is also taxable income. The payers should issue Form W-2G to the IRS and the punter. Moreover, the players will not get any deductions for their sports betting losses if they haven’t itemized their deductions.
Along with a 3.07% Pennsylvania tax on net gambling winnings, the sports bettors also owe about 35% of their winnings to the federal government.
Online Gambling and Tax
Online casinos and sports betting apps are the future of gambling as they are much more accessible and welcoming. Anyone with a good internet connection can place their bets while sitting in their homes and enjoy the thrill of online gambling. These apps have taken the world by storm. Those looking for a convenient and easy way to gamble should check out online casinos. However, winnings generated from online gambling are subject to tax at the same rate as amounts procured from physical casinos.
The payer will also send the players the Form W-2G if the online casino winnings are subject to backup withholding or regular gambling withholding for federal income tax purposes. If the online casino players want a detailed report about their wins and losses for deductions of taxes, they can request the online casino for the same.