Every dollar you win gambling is taxable income. There is no minimum below which gambling winnings are tax-free - if you win $50 at a poker table, it is technically income. The IRS is equally clear that gambling losses are deductible only if you itemize deductions, and only up to the amount of your gambling winnings. If you win $5,000 and lose $8,000 in the same year, you pay tax on $5,000 and the extra $3,000 of losses disappears entirely - no carryforward.
Winnings: 100% taxable, reported as Other Income on Schedule 1. No threshold. No netting against losses unless you itemize.
Losses: Deductible ONLY if you itemize on Schedule A. Limited to the amount of gambling winnings reported. No carryforward. Excess losses are gone forever.
If you take the standard deduction (most people): You pay tax on all your gambling winnings and get zero deduction for losses.
Gambling establishments issue Form W-2G when winnings exceed certain thresholds. Receiving a W-2G means the casino has already reported that winning to the IRS. Not receiving a W-2G does not mean the income is not taxable - it is. All gambling income is taxable regardless of whether a W-2G is issued.
| Game Type | W-2G Issued When | Withholding Required |
|---|---|---|
| Slots / Bingo / Keno | Winnings $1,200 or more | If winnings minus wager exceed $5,000 |
| Poker tournaments | Winnings over $5,000 (net of buy-in) | 24% backup withholding applies |
| Horse racing / Jai alai | Winnings over $600 AND 300-to-1 or greater odds | If over $5,000 |
| Lottery | Winnings $600 or more AND at least 300-to-1 | 24% if over $5,000 |
| Sports betting | Winnings $600 or more AND at least 300-to-1 odds | 24% if over $5,000 |
| Table games (blackjack, craps, roulette) | Generally not subject to W-2G | Table games are rarely withheld - but winnings are still taxable |
Rev. Proc. 2015-29 established the session method for slot machine gamblers - and by analogy, IRS guidance has extended this concept to other casino games. Rather than reporting each individual pull of a slot machine or each individual hand as a separate transaction (which would produce enormous gross winnings and losses), a gambler can report their net results from a single session of gambling.
A "session" is a single visit to a casino or gambling establishment. All activity during that visit at the same type of game (e.g., all slot machine play during one casino visit) is aggregated. If you put $500 into slot machines and walk away with $700 during a session, you report $200 of net session winnings - not $700 of gross winnings and $500 of losses. If you walk away with $300, you have $200 of session losses (only deductible if you itemize).
A gambler who is in the trade or business of gambling - meaning they pursue gambling full-time in good faith, with regularity and continuity, as a means of livelihood - is a professional gambler and reports gambling income and expenses on Schedule C. The professional gambler can deduct ordinary and necessary business expenses (travel, meals, subscriptions, entry fees) against gambling income, and can have a net loss from gambling that offsets other income - unlike the casual gambler whose losses are capped at winnings.
The IRS and courts apply a facts-and-circumstances test. The nine hobby loss factors (Treas. Reg. §1.183-2) are relevant. Most recreational gamblers do not qualify as professionals no matter how much they gamble. Professional gambler status requires genuine profit motive, businesslike conduct, and usually dependence on gambling as a primary livelihood.