Gambling in the USA
What You Need to Know About Gambling and Your 2021 Taxes
The deadline for filing 2021 federal tax returns looms on April 18 this year and for gamblers, it’s an occasion to be reminded of how the tax code addresses their gaming activity. Generally speaking, that’s not too kindly.
The bottom line is simple and stern. As a rule, all income from gambling — including real money online casino play — must be reported eventually on Line 8 of the familiar Form 1040 (along with inclusion on Schedule 1).
To some, it may come as a surprise that gambling income is reported as a gross figure and not a net result. That stands in contrast to, say, capital gains or losses realized in stock transactions, which are reported on Line 7 of the Form 1040 (usually, along with a Schedule D).
In plain English and by example what that means is this: If a taxpayer wins $500 playing the slots in a casino on Monday and then loses $800 playing the slots on Tuesday, the taxpayer is required to report the $500 win on his Form 1040 on Line 8. The $800 loss would be accounted for on Schedule A (Itemized Deductions) — but there are caveats.
The first may be familiar to taxpayers who gamble. Reported gambling losses cannot exceed gambling wins so in the above example, the taxpayer would have an allowable deduction of just $500 for net zero result (the gamble eats the excess $300 loss). But then there’s another issue.
The taxpayer gets to account for gambling losses only if he/she itemizes deductions on Schedule A. And as a result of the 2017 tax revision, the allowance for the standard deduction was raised to a point where it doesn’t make financial sense for the vast majority of taxpayers to itemize their deductions.
What that means for many taxpayers who gamble relatively modestly is that they have no opportunity to deduct any gambling losses. So, the gaming “win” stands alone as income even if the aggregate gambling activity was a net loss.
As an aside, the standard deduction for married couples filing a joint return for tax year 2021 is $25,100. For single taxpayers and married individuals filing separately, the standard deduction is $12,550. For heads of households, the standard deduction is $18,800.
The impacts of gross gambling income on line 8 may be subtle but can be significant. For instance, that amount gets carried down to Line 11, adjusted gross income, which can affect a range of tax circumstances, such as how much of the taxpayer’s Social Security benefits are taxable.
FUNDAMENTAL TAX RULES FOR GAMBLERS
- Taxpayers who gamble should remember that all gambling winnings must be reported as income regardless of whether the operator issues documentation, such as a W-2G or a Form 1099.
- Unfortunately, gamblers cannot “net” their winnings and losses when reporting gambling income. Gambling income is usually reported on Schedule 1 and then carried over to Form 1040, Line 8.
- Gambling losses are accounted for on Schedule A, Itemized Deductions, and taxpayers must itemize to get the benefit of a gambling loss deduction. However, taxpayers have to choose between itemizing deductions or taking the standard deduction.
- If gambling losses are taken as a deduction, they cannot exceed the amount of gambling wins.
- Win or lose, taxpayers should keep a journal of their gambling activity. They should note where, when, what games were played, and how much was won or lost. Taxpayers should also keep any evidence of wagering activity, losses included.
- State taxes may also be due on gambling winnings and rules vary from state to state. Gamblers should familiarize themselves with their state’s tax policies on gambling income.
OTHER THINGS TO KEEP IN MIND
The proliferation of gambling, both bricks-and-mortar and on the internet, has created complications for taxpayers that should be addressed by a tax professional but there are some things taxpayers should keep in mind.
As mentioned earlier, keeping a journal of gambling activity be part of your record-keeping.
Remember, all gambling winnings are reportable even if a gambling operator doesn’t issue paperwork, often a W-2G or a 1099-MISC or a 1099-K.
And speaking of W-2Gs, here are the occasions when the Internal Revenue Service says a W-2G should be issued by the gambling operator:
- 1. The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine;
- 2. The winnings (reduced by the wager) are $1,500 or more from a Keno game;
- 3. The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament;
- 4. The winnings (except winnings from bingo, slot machines, keno, and poker tournaments) reduced, at the option of the payer, by the wager are:
- a. $600 or more, and
- b. at least 300 times the amount of the wager; or
- 5. The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding).
What may irritate taxpayers who gamble is how gambling activity is treated as opposed to something like day-trading stocks. In the latter case, which also involves substantial risk-taking, the stock day-trader gets to net losses against gains without having to choose between itemizing deductions and taking the standard deduction.
UNFAIRNESS TO GAMBLERS
The unfairness to taxpayers who gamble, particularly those who play at modest levels, was noted by the American Gaming Association, the trade group that represents the gambling industry, when the 2017 tax code was being revised.
“Under such a higher standard deduction, small and mid-level slot machine players may not be able to itemize their deductions, even with their gaming losses, and hence may not be able to offset gaming wins reported as income with the full amount of their gaming losses,” the AGA said in a letter to Capitol Hill.
“AGA strongly recommends, as a matter of tax simplification, that gaming players should be permitted to subtract gaming losses from gaming winnings in order to compute their taxable net gaming income for purposes of reporting adjusted gross income, without being required to itemize their deductions.”
Unfortunately for gamblers, that recommendation was not taken by the Congress.
For years, the AGA has been trying to get the threshold for issuing W-2Gs raised from $1,200 to $5,000 without any luck. However, early in March, the Congressional Gaming Caucus advanced an effort to raise the slot tax threshold to $5,000 with bipartisan legislation and also provide a mechanism for future increases based on inflation. The current $1,200 slot tax threshold has not been adjusted for inflation since 1977 and, since then, the instances of $1,200 W-2Gs has skyrocketed.
DON’T FORGET STATE TAXES
In addition to concerning themselves with federal taxes, gamblers need to deal with state income tax obligations. Some states allow deductions for losses, some do not. Some states allow for losses and wins to be netted, most do not.
Michigan, for example, changed its tax laws recently to allow for gambling loss deductions where there are winnings. Mississippi, meanwhile, has its 3% tax where the gaming establishment withholds a 3% “nonrefundable” tax at the time a W-2G-level jackpot is hit regardless of whether the winner is a state resident.
Casino customers from outside the country get separate treatment. In many cases, the United States has tax treaties with other countries that dictate how non-U.S. gamblers are treated from a tax perspective. For instance, in the United Kingdom, gambling winnings are not taxed and the U.S. tax treaty with the UK means that U.S. taxes are not withheld from those gambling customers.
Gambling in the USA
BMM INNOVATION GROUP SHOWCASES ITS SUPPORT FOR TRIBAL SOVEREIGNTY AT INDIAN GAMING CONFERENCE & EXPO MARCH 31 – APRIL 3 AT SAN DIEGO CONVENTION CENTER
Company to sponsor, attend, and speak at the San Diego, California show.
BMM Innovation Group (“BMM,” “BIG Group,” or “BIG”), a technology conglomerate focused on product compliance testing, cybersecurity solutions, and virtual training for the global gaming industry, today announced its sponsorship and participation in the Indian Gaming Association’s (“IGA”) annual IGA Conference & Expo, March 31-April 3 at the San Diego Convention Center.
With over three decades of experience supporting Tribal gaming, BIG will be on-site as sponsors, speakers, and attendees to reinforce the Company’s steadfast commitment to Tribal sovereignty and self-regulation.
Proud Partners in Tribal Progress
The BIG Group’s Chairman, President, and Chief Executive Officer Martin Storm said, “BMM proudly partners with Tribal governments, Tribal casinos, and Tribal gaming equipment and technology suppliers to advance Tribal sovereignty, self-determination, and economic development. We are honored to continue supporting the growth and integrity of Tribal gaming through our trusted product compliance services, world-class training and virtual education, and our cybersecurity solutions to protect Tribal enterprises.”
BMM’s long-standing relationships with Tribal gaming suppliers and regulators are at the heart of its mission. As active members of IGA and other key Tribal organizations, BIG is committed to elevating Tribal voices and ensuring Tribal interests remain at the forefront of industry growth.
BIG Group Shares Thought Leadership on Conference Panels and Trainings
- In addition to sponsoring and attending, the BIG Group’s expert thought leaders will speak and provide in-person training at the conference:
- Tuesday, April 1 at 9 am: Innovation vs. Regulation: Keep Pace with Emerging Gaming Technologies – Sean Mason, Senior Director of Tribal Services
- Tuesday, April 1 at 4 pm: Gaming and Cyber Risk Best Practices – Mitigate Risk and Sleep Better at Night – Heather Lee, Senior Director of Sales for BIG Cyber
- Wednesday, April 2 at 9 am: Level III Commissioner Certification Training – Peter Nikiper, Director of Technical Compliance
Unmatched Expertise in Product Compliance and Certification
As a trusted testing laboratory for Tribal gaming jurisdictions across North America, BMM’s focus is fairness, integrity, and security in every gaming environment. IGA attendees are invited to connect with BMM experts to learn more about the Company’s comprehensive product compliance programs.
Education & Training for Long-Term Success
BIG continues to empower Tribal gaming employees through exclusive education and training programs, including free access to RG24seven Virtual Training. These knowledge-sharing initiatives are designed to support responsible gaming, regulatory compliance, and the long-term sustainability of Tribal gaming operations.
Cybersecurity Solutions Tailored for Tribal Gaming
The BIG Group is focused on bolstering cybersecurity defenses for Tribal enterprises through its BIG Cyber services, which includes penetration testing, vulnerability assessments, PCI:DSS evaluations, and a host of managed security services featuring CYREBRO’s Security Operations Center, KnowBe4’s security awareness training, and Maxxsure’s risk management platform.
Gambling in the USA
Bruce Smith Enterprise and The Cordish Companies Break Ground on New Live! Casino & Hotel in Petersburg, Virginia
Bruce Smith Enterprise and The Cordish Companies celebrated the groundbreaking of the new LIVE! CASINO & HOTEL VIRGINIA in Petersburg. The milestone officially commences construction on a transformative project that will generate billions of dollars in economic benefits and spinoff development, create thousands of new jobs, and set a new standard for gaming, hotels, and entertainment in the Commonwealth. Live! Casino & Hotel Virginia is part of a larger $1.4 billion master plan by the partnership, scheduled to be developed in phases, that will bring a world-class mixed-use resort destination to Petersburg.
Executives from Bruce Smith Enterprise, The Cordish Companies, and Cordish Gaming were joined by Petersburg City Mayor Sam Parham and members of Petersburg City Council, Virginia State Senator Lashrecse Aird, Virginia State Delegate Kim Taylor, and many other business and community leaders at the project site in Petersburg. The development site, ideally located on Brasfield Parkway at the intersection of Wagner Road and Interstate I-95 just 20 miles south of Richmond, will provide easy access on and off the East Coast’s major north-south interstate.
“It has been a source of immense satisfaction and pride to partner in this incredible development. For far too long people have simply driven by the City of Petersburg, but today marks the beginning of a new era in which Petersburg will become a prime destination. This pivotal project will ignite tourism, create jobs, and ultimately deliver on the promise of greater opportunity and upward mobility for local families. As a champion of Petersburg and its residents, I am happily confident that this historic development will uplift, empower, and enrich this community for years to come,” said Bruce Smith, founder of Bruce Smith Enterprise.
Live! Casino & Hotel Virginia is slated to open in 2027. A temporary gaming facility will open by the end of 2025 to immediately begin creating an estimated 500 new jobs, vendor opportunities and economic benefits for the City. In its first 10 years, the project is expected to generate $2.8 billion in economic stimulus to the region; $504 million in tax revenues including $240 million to the City of Petersburg; $802 million in economic benefits during construction; $201 million in annual economic benefits each year after opening; and 7500 new jobs including 6100 during construction and 1400 new permanent jobs.
“Today marks a monumental day for The Cordish Companies as we expand our Live! brand into the Central Virginia region with the development of Live! Casino & Hotel Virginia. Our company is a national leader in successfully developing and managing large-scale urban revitalization projects across the country. Live! Casino & Hotel will be a transformative development that will bring a world-class gaming and entertainment experience to millions of visitors, create significant new jobs, and generate millions of dollars in economic benefits for the community that will provide a beneficial impact for generations. We look forward to making an immediate impact on the region with the construction of a temporary gaming facility that will be operational before the end of 2025, so that we can begin creating jobs, vendor opportunities and economic benefits for the City,” said Zed Smith, Chief Operating Officer for The Cordish Companies.
PENN Entertainment announced that its stand-alone Hollywood Casino app has launched in New Jersey. The new Hollywood Casino platform is available on Android, iOS, and desktop and can also be accessed via the ESPN BET app. Customers can login to Hollywood Casino using their ESPN BET credentials, allowing for a seamless experience across PENN’s online betting and casino platforms.
Ranked by Eilers & Krejcik as the #2 overall iCasino product in the US, Hollywood Casino offers a variety of online slots, table games, and live dealer content, including original titles from PENN Game Studios, the company’s in-house casino game development studio. Hollywood Casino also includes bespoke live dealer tables and exclusive games such as the recently launched Devils Blackjack, an original title leveraging PENN’s partnership with the New Jersey Devils.
“We’re thrilled to introduce our dedicated, casino-first experience to customers across New Jersey. Hollywood Casino delivers a best-in-class experience with an extensive game library, seamless gameplay, and exclusive content from our in-house studio. This launch builds on the strong momentum we’ve gained since introducing our enhanced standalone app in December,” said Aaron LaBerge, Chief Technology Officer of PENN Entertainment.
The stand-alone Hollywood Casino platform debuted in Pennsylvania last December and is also available in Michigan.
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