Do You Have to Pay Gambling Taxes in Pennsylvania and New Jersey?
In Pennsylvania, gambling taxes apply to all forms of wagering – lotteries, sports betting, horse racing, slots and casino games. Depending on your win amount, casinos may withhold 24% of your winnings or 27% if you fail to provide your SSN.
The gambling winnings are also considered part of your income, with a flat tax of 3.07%. Instead of 3.07%, the income tax in New Jersey is variable, from 1.4% to 10.75%. However, gambling wins could place you in a higher bracket, which can result in higher taxes. The good news is, winnings under a specific amount aren’t subject to gambling taxes. Read on for more details.
Gambling taxes for casual players
In Pennsylvania and New Jersey, casual players must pay gambling taxes according to the abovementioned rates. However, you can deduct your losses to reduce tax. This requires itemizing deductions on your Schedule A tax return.
Additionally, deductible losses can’t exceed winnings. For instance, if you have $10,000 in winnings but $20,000 in losses, you can only deduct $10,000 as losses.
Gambling taxes for professional gamblers
Many players ask – is gambling tax free for professional players? It is! As gambling is their primary activity, winnings are considered a regular income. Therefore, they’re only subject to the regular income flat tax of 3.07% in Pennsylvania and variable tax in New Jersey. Professional gamblers must complete the tax return Schedule C to declare these winnings.
In addition, a professional gambler can also deduct other gambling expenses, such as entry fees, accommodation, meals, etc. The same situation applies to players from New Jersey.
Reporting Your Winnings in Pennsylvania and New Jersey
There are two main ways to report your winnings in Pennsylvania and New Jersey, depending on their amount. 24% is automatically deducted from your payout if your winnings exceed the threshold. In this case, you’ll receive a W-2G form to report your winnings and gambling tax paid.
Even if the amount doesn’t exceed the threshold, it’s your legal obligation to report winnings through the US Individual Income Tax Form 1040 as “Other Income”. Your winnings must be reported under the Pennsylvania Income Tax Return PA-40 Schedule.
How Much Do You Have to Report in Pennsylvania and New Jersey
You must report all your gambling winnings in Pennsylvania. However, you only have to pay gambling tax if the payout exceeds the threshold. In this case, 24% will be withheld by the operator and filled under the W-2G form.
Nonetheless, all gambling winnings are considered taxable income at a rate of 3.07%. See the table for more information.
| Type of game | Starting amount for withholding | Tax percentage (%) |
|---|---|---|
| Slots | $1,200 | 24% + 3.07% income tax |
| Poker Tournaments | $5,000 | 24% + 3.07% income tax |
| Game of Chance | $600 | 24% + 3.07% income tax |
| Game Shows | $600 | 24% + 3.07% income tax |
| Sportsbooks | $600 | 24% + 3.07% income tax |
| Horse Racing | $600 | 24% + 3.07% income tax |
| Keno | $1,500 | 24% + 3.07% income tax |
| Lotteries | $5,000 | 24% + 3.07% income tax |
In New Jersey, the situation is very similar. The main difference is that this state’s income tax is 3% instead of 3.07%.
| Type of game | Starting amount for withholding | Tax percentage (%) |
|---|---|---|
| Slots | $1,200 | 24% + variable income tax |
| Poker Tournaments | $5,000 | 24% + variable income tax |
| Game of Chance | $600 | 24% + variable income tax |
| Game Shows | $600 | 24% + variable income tax |
| Sportsbooks | $600 | 24% + variable income tax |
| Horse Racing | $600 | 24% + variable income tax |
| Keno | $1,500 | 24% + variable income tax |
| Lotteries | $5,000 | 24% + variable income tax |
Slots
Both states automatically withhold slot winnings over $1,200 through the W-2G form. In Pennsylvania, winnings over this value are subject to the 24% gambling tax and 3.07% income tax. In New Jersey, the income tax is variable.
| Pennsylvania | $1,200 | 24% + 3.07% income tax |
| New Jersey | $1,200 | 24% + variable income tax |
How much will I pay?
Consider the following example – you’ve won $5,000 playing a slot in Pennsylvania. From here, the casino will withhold $1,200 in gambling taxes (24%), and you’ll have to declare income tax (3.07%). Your net payout will be $3,647. In New Jersey, you’d receive $3,730, not accounting for additional sources of income (1.4% income tax).
Poker tournaments
In Pennsylvania, winnings over $5,000 from poker tournaments are subject to a 24% retention plus 3.07% income tax. Regarding New Jersey, the income tax is 3%. You can deduct your buy-in amount from these values.
| Pennsylvania | $5,000 | 24% + 3.07% income tax |
| New Jersey | $5,000 | 24% + variable income tax |
How much will I pay?
Let’s say you’ve won $10,000 in a PA poker tournament. The casino will keep $2,400 in gambling taxes through the W-2G form. You will also have to pay 3.07% ($30.70) income tax on your payout so the total will be $7,293. If you were betting from New Jersey, the total would be $7,460 (1.4% income tax).
Games of chance
You can expect a 24% gambling tax plus income tax, at 3.07% or variable (for NJ), in games of chance (e.g., slots) if your winnings are over $600 in Pennsylvania and New Jersey.
| Pennsylvania | $600 | 24% + 3.07% income tax |
| New Jersey | $600 | 24% + variable income tax |
How much will I pay?
Imagine you win $1,000 playing a blackjack game at a Pennsylvania casino. In this case, the casino will withhold 24% ($240) of your winnings. Additionally, you’ll have to pay 3.07% ($30.70) income tax at the end of the year. Therefore, you’ll receive $729. If you’re playing in New Jersey, that amount would be $746 (1.4% income tax).
Game shows
Game shows work similarly to games of chance. Winnings over $600 are taxed at 24% plus 3.07% income tax in Pennsylvania. The situation is the same in New Jersey, albeit the income tax is variable.
| Pennsylvania | $600 | 24% + 3.07% income tax |
| New Jersey | $600 | 24% + variable income tax |
How much will I pay?
If you win $2,000 on a live game show, the casino will withhold 24% of your winnings. Your winnings are also subject to income tax at 3.07%. Your total payout will be $1,459 in Pennsylvania or $1,492 in New Jersey (1.4% income tax).
Sportsbooks
Sportsbook winnings have one of the lowest thresholds in Pennsylvania’s gambling laws. Any winnings over $600 are taxed at 24% plus 3.07% income tax. In New Jersey, the income tax for sportsbook wins is variable.
| Pennsylvania | $600 | 24% + 3.07% income tax |
| New Jersey | $600 | 24% + variable income tax |
How much will I pay?
Let’s say you placed a wager on your favorite team and won $50,000. In this case, the casino will withhold 24% ($12,000) through the W-2G form. You’ll also have to declare the winnings as income, subject to a 3.07% ($1,535) tax.
In total, you’ll end up with $36,465. If you were betting in New Jersey, the total would be $36,250 (3.5% income tax).
Horse racing
Like other parimutuel bets, horse races are taxed at 24%. Additionally, you’ll have to declare your winnings as income with a 3.07% flat tax in Pennsylvania or variable in New Jersey.
| Pennsylvania | $600 | 24% + 3.07% income tax |
| New Jersey | $600 | 24% + variable income tax |
How much will I pay?
If you win a $600 wager, you’d have to pay $144 in federal taxes (24%) plus $18 in income tax. Therefore, your total would be $438 in PA or $447.6 in NJ (1.4% income tax).
Keno
Keno games have a higher threshold in Pennsylvania, at $1,500. Winnings over this value are subject to 24% gambling taxes plus 3.07% income tax. In New Jersey, the income tax for Keno winnings is variable according to your tax bracket.
| Pennsylvania | $1,500 | 24% + 3.07% income tax |
| New Jersey | $1,500 | 24% + variable income tax |
How much will I pay?
If you win $1,500 in a Keno game, you’ll have to pay 24% ($360) plus 3.07% income tax ($46). Therefore, your net payout will be $1,094 in PA or $1,119 in NJ (1.4% income tax).
Lotteries
Lotteries have one of the highest thresholds of all forms of gambling. You’ll only have to pay gambling winnings tax if you win over $5,000. However, you always have to declare your gambling wins as income, at a 3.07% tax for PA and 3% for NJ.
| Pennsylvania | $5,000 | 24% + 3.07% income tax |
| New Jersey | $5,000 | 24% + variable income tax |
How much will I pay?
Imagine you land a jackpot of $600,000 in a Pennsylvania lottery. From this amount, the lottery operator will keep 24% ($144,00). Additionally, you’ll have to pay 3.07% ($18,420) as income tax. Overall, you’ll win $437,580.
In New Jersey, that amount would be $417,780, as your tax bracket has an income tax of 6.37%.
Final Thoughts
It’s essential to consider two types of taxes when you’re playing in Pennsylvania or New Jersey – federal gambling tax (24%) or income tax (3.07% or 3%). After all, taxes are a legal obligation of every US citizen.
However, remember that income tax in New Jersey varies between 1.4% and 10.75%, depending on your earnings.