Most states require you to pay taxes on gambling winnings. Of course, some states are friendlier than others when it comes to taxing your wins.

Certain places don’t charge any taxes when you win in gambling. You definitely want to consider betting in these states when you have the opportunity.

But what are the states that don’t tax gambling winnings? Of the states that do tax, which ones don’t charge you much?

(7) Net gambling and lottery winnings (other than noncash Pennsylvania Lottery winnings); and (8) Net gains or income derived through estates or trusts. Except for a few narrowly defined reductions to compensation, the tax is applicable to gross income (e.g., gross compensation, gross interest income and gross dividends). Pennsylvania Tax Rate for Gambling Winnings Pennsylvania personal income tax is currently levied at the rate of 3.07 percent against taxable income, including gambling and lottery winnings. Paying Gambling Taxes in Pennsylvania. Do you have to pay taxes on your gambling winnings? OnlineUnitedStatesCasinos has gathered everything you need to know about paying taxes on your gambling winnings straight from a Certified Public Accountant. For more information please visit our exclusive Gambling Taxes article. However, you can also apply the same tax withholding structure for your gambling winnings that you apply to other types of income. The income tax rate is 24% on all types of gambling profits, but there are certain sources of these winnings that are automatically subject to withholding tax.

This page discusses where you can gamble tax-free (minus federal taxes). It also covers what else you should know regarding taxes on real money gambling.

States That Don’t Tax Your Gambling Winnings

If you look at the gambling laws by state, nine states don’t collect taxes from your betting wins. That said, you’ll want to keep the following places in mind when planning your next gambling trip.

Alaska

The Last Frontier doesn’t offer many gambling opportunities on its frontier. Alaska only provides legal casino cruise ships, bingo, and pull tabs. At least you don’t need to pay state taxes when winning through any of these activities, though.

Delaware

With fewer than 974,000 residents, The First State isn’t overly large. Nevertheless, it does offer a thriving gaming industry that includes three racinos.

Florida

The Sunshine State boasts tribal casinos, poker rooms, and racetracks. Floridians also enjoy a 0% tax when winning at these gambling establishments.

Nevada

With over 440 casinos, Nevada’s gaming industry needs no introduction.

The Silver State won’t level state taxes on any of the big jackpots you win in Las Vegas, Reno, Laughlin, or elsewhere.

New Hampshire

The Granite State offers a few charity casinos and sportsbooks. You won’t need to pay taxes to New Hampshire when beating the bookies or casinos.

South Dakota

South Dakota may not have the largest population (885k). But it still offers 45 casinos and a bustling gaming destination in Deadwood.

Texas

The Lone Star State boasts one of the largest populations with 29 million residents. However, it doesn’t offer an abundance of gambling options compared to its big population. Texas features a few casinos (Class II only), horse tracks, and charity gaming venues.

Washington

The Evergreen State features a harsh stance on online gambling that includes felony charges. Nevertheless, it does offer some betting opportunities, including tribal casinos, poker rooms, and racetracks.

Wyoming

Wyoming is the smallest state in terms of population (579k). It still provides some gaming venues, though, including charity casinos, horse tracks, and poker rooms.

States With Low Tax Rates on Gambling Wins

Most states do tax you to some degree regarding winnings, and some states have a high gambling tax. However, the following ones don’t take much from you.

Arizona

The Grand Canyon State provides tribal casinos, horse tracks, and charity gaming. Arizona features a relatively low 4.54% tax rate on gambling wins.

Indiana

The Hoosier State features several casinos, multiple sportsbooks, and regulated online betting. Indiana taxes winnings at a 3.23% rate.

Michigan

Michigan offers 26 casinos, including three commercial venues in Detroit and 23 tribal establishments throughout the state.

It also features sports wagering and legal online gambling sites. The Wolverine State only charges a 4.25% tax rate on winnings.

North Dakota

Out of the states that tax winnings, North Dakota does it to the smallest degree at 2.90%. The Roughrider State provides tribal casinos, charity casinos, and lotteries.

Pennsylvania

Pennsylvania has become a mini-Las Vegas with 12 casinos along with poker rooms and sportsbooks. It only charges a 3.07% tax rate on gambling wins.

What If You Win in a State That Taxes Casino Winnings?

Only nine states let you off the hook regarding income tax on winnings. Odds are, you live in a state that taxes gambling profits.

That being said, take surrounding states and their taxes into consideration. Provided you live in/near a state with no, or low, gambling taxes, then you’re in good shape.

Federal Taxes Always Apply

Earlier, I covered nine states that don’t tax your wins in casinos, sportsbooks, poker rooms, etc. Even if you hail from one of these places, though, you still need to cover federal taxes.

Uncle Sam taxes your gambling winnings at 24%. This percentage is almost double the top rate in California (13.3%), which features the highest top-end gambling tax out of any state.

The federal government doesn’t expect you to only report jackpots or highly profitable years. It wants you to report every penny earned through gambling.

Of course, the IRS almost assuredly won’t hound you over a $10 winning Super Bowl bet against your friend. They will, however, care when you’re hitting jackpots and making serious profits.

A State Can Withhold Federal Taxes From Your Casino Wins

States are supposed to withhold federal taxes from large gambling payouts. Their casinos and sportsbooks will also issue a W-2G form if the win is big enough.

You need to fill this form out and give it to the gambling establishment. They’ll turn around and send it to the IRS before releasing your winnings.

Here are the guidelines on when bookmakers/casinos/poker rooms hand you a W-2G:

• $5,000+ payout in a poker tournament.
• $1,500+ payout in keno.
• $1,200+ payout through a slot or video poker machine.
• $600+ payout for a winning horse or sports bet (if win is 300x your stake).

Gambling Losses Are Deductible

As covered before, the IRS and state governments want you to report every dollar earned through gambling. However, you can deduct losses from winnings.

Everything that you wager and lose en route to winning counts as itemized deductions. These deductions reduce the amount of taxable income you’ll owe.

Here’s an example:

• You win $2,500 through a slot machine.
• You must report $2,500 under “other income.”
• You spend $1,700 to win this amount throughout the year (itemized deductions).
• $2,500 – $1,700 = $800 in reportable income.

You should record all of your gambling sessions for tax purposes. If the IRS ever comes calling for an audit, you’ll want evidence of your wins and losses.

The more information you possess, the better chance you stand of passing an audit with flying colors.

Can You Get Away Without Paying Gambling Taxes?

For the sake of avoiding any legal headaches, you should report gambling income and pay taxes on it. Of course, you may still wonder if it’s possible to get away without covering gaming related taxes.

Three potential reasons why you might wonder this include:

1. You don’t want to mess with $50, or so, of gambling winnings.
2. You don’t have records of losses and think that it’s unfair to cover taxes on wins.
3. You win big and want to avoid paying taxes.

In the first two cases, you may feel justified in not covering taxes. Dealing with winnings can be a major headache in these situations.

In the third case, you likely know that failing to cover taxes on huge wins is wrong. But you may consider it anyways because you don’t feel like giving away a chunk of your payout.

Again, state governments and the IRS want you to report everything. They leave it up to you to follow the laws in your respective jurisdiction.

I suggest that you keep records and go the honest route with gambling taxes. This way, you don’t need to sweat if you’re ever audited.

One situation when you definitely want to report wins is if you receive a W-2G form. Casinos and sportsbooks send W-2G’s to the IRS.

Therefore, the taxman will have documentation that you’ve earned a big prize. You don’t want to give them a reason to audit by not covering taxes on a large payout.

Conclusion

Hopefully, you live in or near a state that doesn’t require you to claim gambling winnings on your taxes. In this case, you can win big and only worry about paying the IRS.

Chances are, though, you live somewhere that imposes income tax on winnings. If so, you should consider if there are any nearby options that either don’t tax gambling wins or at least feature low rates.

Maybe this issue isn’t of the utmost importance to you—especially when you’re only playing for small stakes. But if you play for mid or higher stakes, then you can save yourself some money by playing where there’s no/little taxes taken from wins.

The Pennsylvania gambling expansion law passed largely because the state desperately needed a new source of tax revenue. One of the biggest sources of that revenue was upfront licensing fees for all the new types of gambling.

Even with the potential for big returns, the first state budget after expansion only expected $100 million from online gambling. That is a figure Pennsylvania surpassed after the first mini-casino auction.

Gambling streams are now blossoming in the Commonwealth, bringing in significant revenue for the state and local entities. How much so far?

Last updated: Nov. 20, 2020

How does that number break down? Let’s look at how much each category brought in:

Sports betting revenue starts rolling in

Sports betting in PA started out with retail only. Since the addition of online sportsbooks, revenue has soared. The majority of sports wagering in PA now happens online, and the state broke handle records every month during the 2019/2020 NFL season.

Consequently, the state’s tax revenue has experienced large gains since online betting was added to the mix.

Here is a look at the tax revenue (state and local) from sports betting so far:

October 2020: $13,239,693
September 2020: $2,257,158
August 2020: $6,578,667
July 2020: $2,933,093
June 2020: $2,397,657
May 2020: $1,738,436
April 2020: $1,038,049
March 2020: $2,480,132
February 2020: $1,700,011
January 2020: $8,222,829
December 2019: $4,094,893
November 2019: $5,299,449
October 2019: $5,381,370
September 2019: $5,062,216
August 2019: $2,201,406
July 2019: $1,026,769
June 2019: $979,302
May 2019: $1,030,267
April 2019: $1,519,733
March 2019: $1,986,962
February 2019: $700,853.95
January 2019: $938,597.00
December 2018: $722,356.00
November 2018: $183,238.77

Online casino taxes now a PA revenue stream

With the launch of online casino sites, the state got another tax revenue stream. In 2020, online casino proved a vital revenue source for PA with land-based casinos and major sports affected by pandemic precautions and closures. With online slots raking 54% in taxes on revenue, that means the state gets even more than the site when it comes to profit.

Table games provide a good chunk as well, with a 16% taxation rate (same as online poker).

Here is a look at slot and table games breakdown by month:

October 2020
Slot tax: $21,788,756
Table games tax: $2,718,140
Total online casino tax: $24,506,896

September 2020
Slot tax: $21,565,077
Table games tax: $2,356,890
Total online casino tax: $23,921,967

August 2020
Slot tax: $21,400,525
Table games tax: $2,173,236
Total online casino tax: $23,573,761

July 2020
Slot tax: $21,300,706
Table games tax: $1,907,184
Total online casino tax: $23,207,890

June 2020
Slot tax: $19,858,788
Table games tax: $1,606,208
Total online casino tax: $21,464,996

May 2020
Slot tax: $21,259,600
Table games tax: $1,987,122
Total online casino tax: $23,246,722

April 2020
Slot tax: $14,755,476
Table games tax: $1,678,339
Total online casino tax: $16,433,816

March 2020
Slot tax: $6,669,348
Table games tax: $1,405,145
Total online casino tax: $8,074,493

February 2020
Slot tax: $5,202,349
Table games tax: $1,284,237
Total online casino tax: $6,486,586

January 2020
Slot tax: $3,883,784
Table games tax: $737,293
Total online casino tax: $4,621,067

December 2019
Slot tax: $3,008,116
Table games tax: $412,956
Total online casino tax: $3,421,072

November 2019
Slot tax: $2,750,645
Table games tax: $415,445
Total online casino tax: $3,166,090

October 2019
Slot tax: $2,147,692
Table games tax: $154,517
Total online casino tax: $2,302,209

September 2019
Slot tax: $1,746,962
Table games tax:$144,039
Total online casino tax: $1,891,001

August 2019
Slot tax: $1,643,397
Table games tax: $191,601
Total online casino tax: $1,835,058

July 2019
Slot tax: $279,564
Table games tax: $47,135
Total online casino tax: $326,700

Online poker joins online slots and table games

Mount Airy launched the first online poker room with PokerStars PA going live Nov. 5, 2019. So far, it is the only operator live in the state, though more operators are expected to join the market in the coming months.

Here is a look at revenue and tax revenue by month for online poker in PA, plus total tax revenue to date.

October 2020
Online poker revenue: $2,422,505
Online poker tax: $387,601

September 2020
Online poker revenue: $2,376,045
Online poker tax: $380,167

August 2020
Online poker revenue: $2,729,199
Online poker tax: $436,672

July 2020
Online poker revenue: $2,986,498
Online poker tax: $477,840

June 2020
Online poker revenue: $3,240,917
Online poker tax: $509,590

May 2020
Online poker revenue: $4,596,418
Online poker tax: $729,851

April 2020
Online poker revenue: $5,253,304
Online poker tax: $837,550

March 2020
Online poker revenue: $3,133,019
Online poker tax: $500,384

February 2020
Online poker revenue: $1,830,356
Online poker tax: $290,752

January 2020
Online poker revenue: $2,157,266
Online poker tax: $345,162

December 2019
Online poker revenue: $2,473,137
Online poker tax: $395,702

November 2019
Online poker revenue: $1,965,494
Online poker tax: $314,479

Mini-casino auction profits

VGT tax revenue

October 2020: $1,256,413
September 2020: $1,239,548
August 2020: $895,509
July 2020: $1,075,974
June 2020: $560,261
May 2020: $0
April 2020: $0
March 2020: $485,682
February 2020: $697,806
January 2020: $579,914
December 2019: $457,159
November 2019: $342,830
October 2019: $242,522
August/September 2019: $168,849

Lottery expansion nears $45 million in revenue in first year-plus

PA Lottery was part of the gambling expansion bill as well. The laws allowed for the introduction of three new elements of lottery offerings. Those are:

• Virtual sports

Keno rolled out May 1, 2018, followed by online lottery games on May 22, 2018. Xpress Sports, the virtual sports element, went live in August.

Based on numbers provided by the PA Lottery in its annual fiscal reports, profits from each of the following game types from launch through July 2019 were as follows:

Online lottery: $32.96 million
Keno and virtuals: $11.62 million

Pennsylvania Tax On Gambling Winnings

Draw tickets such as Mega Millions and Powerball are now available for purchase online through the iLottery too, as of January 2020. In May, 2020 the PA lottery reported that online sales had crossed $1 billion since launching less than two years prior. Exact revenue figures for the fiscal year are forthcoming.

Daily fantasy sports revenue

While daily fantasy sports (DFS) was not explicitly illegal in Pennsylvania, the 2017 gambling expansion regulated the industry. With that regulation comes taxation and licensing fees.

Ten fantasy sports operators needed to each pay a $50,000 licensing fee. Their revenue is taxed at a rate of 15 percent. Here is a look at each month’s tax revenue from DFS as well as the total amount of tax revenue to date:

• October 2020: $480,451
• September 2020: $485,124
• August 2020: $320,174
• July 2020: $138,861
• June 2020: $97,087
• May 2020: $47,826
• April 2020: $25,088
• March 2020: $108,591
• February 2020: $255,366
• January 2020: $309,716
• December 2019: $515,343
• November 2019: $447,174
• October 2019: $489,654
• September 2019: $439,357
• August 2019: $208,295
• July 2019: $186,730
• June 2019: $238,847
• May 2019: $270,458
• April 2019: $277,883
• March 2019: $245,226.70
• February 2019: $244,376.75
• January 2019: $317,475
• December 2018: $429,075.51
• November 2018: $486,174.15
• October 2018: $435,429.45
• September 2018: $320,057.10
• August 2018: $141,543.03
• July 2018: $131,727.75
• June 2018: $152,679.34
• May 2018: $199,755.94

Lady Luck Nemacolin lone sports betting holdout

In August 2018 Pennsylvania finally got its first official sports betting applicant. Penn Nationalfiled its petition, breaking the weeks of inactivity that had many worrying that nobody would bite.

A total of 12 of the 13 eligible casinos submitted applications for the $10 million license. The lone holdout is Lady Luck Nemacolin.

There are currently 12 retail sportsbooks spread across the state (with Oaks now permanently closed), and double-digit online sports betting apps.

Interactive gaming petitions generate $94 million

The 90-day window for PA casinos to apply for $10 million comprehensive interactive gaming petitions opened in mid-May, 2019. For the first 85 days, there was no news — a panic set in that there might be few or no applicants.

In the end, though, a majority of the 13 casinos ponied up the fee, which allows them to offer online peer-to-peer games like poker, online slots, and online table games. The seven casinos who filed for petitions and received approval are:

Once the all-in-one license application period ended, PA casinos could still purchase a la ca carte licenses for each of the three categories. Presque Isle Downs owner Churchill Downs spent $8 million applying for online poker and online slots. In an unusual move, Mohegan Sun Pocono paid a $2 million premium to apply for all three licenses for $12 million.

Rivers Pittsburgh surprisingly rescinded its interactive application. Rush Street Gaming owns both Rivers casinos (and the SugarHouse brand), so the Rivers Philadelphia license supports online casino products for both venues. That opens up three more licenses, bringing the total to 10.

Stadium Casino rescinded its peer-to-peer application but retained its online slots and table games licenses so that it would pay $8 million in licensing fees.

Mohegan Sun Pocono informed PGCB that it would not seek to offer online poker either, so it too had to pay $8 million.

The Meadows and Lady Luck Nemacolin opted not to apply for any interactive gaming licenses. The Meadows is owned by Penn National, who already applied for a comprehensive license. Lady Luck Nemacolin is managed by Churchill Downs now, and defers to Presque Isle on the online gaming front.

Where does that leave these leftover licenses? The next step was to open up the applications to entities outside of Pennsylvania. The two applicants in that category were MGM Resorts and Golden Nugget Atlantic City. MGM is approved to offer casino, sports betting, and online poker – which will be under the partypoker brand. Golden Nugget only applied for online casino and sports betting.

Law generates $51 million for PA in a matter of hours

In 2017, the state received two payments in the days immediately following the passage of the law. One was a $1 million payment from Valley Forge Casino to remove the amenity fee requirement on the Category 3 property. The other was a $50 million payment by Stadium Casino LLC for its Category 2 casino license. The group is in the process of building a casino in the Stadium Park area of Philadelphia.

In June of 2018, the Stadium Casino project paid the state an additional $24,750,000 for the right to offer table games at the property when it opens, bringing the total licensing brought in from the group to $74.75 million.

Pa Tax Rate On Gambling Winnings

Other sources of revenue from the law include:

On Oct. 31, Valley Forge also took advantage of another change in the law. For $2.5 million, the resort casinos could up the number of slot machines on property. After a year of gaming revenue growth, the casino decided it was time to expand.

Pennsylvania State Tax On Gambling Winnings

After nearly a year and a half of the law being in effect, Lady Luck Nemacolin elected to pay the $1 million to eliminate its $10 Category 3 amenity fee, leaving the state with no more casinos charging for entry.