New Jersey Online Casinos
are becoming one of the fastest-growing businesses of gambling markets in the U.S. with legal sports betting, online gambling and even more available to customers. Bettors now have more opportunities to cash winning tickets and earn profits at the state’s sportsbooks and gaming as well as poker tables. Whether hitting a jackpot or taking home a modest return, paying taxes on those winnings goes hand in hand with the experience.
This includes all gambling income; whether won at land-based casinos, or on the state’s online casino sites, these winnings are subject to tax and should be reported on your federal and New Jersey income tax returns.
What are the tax rates?
Tax rates depend on your annual income and tax bracket. Gambling income is subject to state and federal taxes but not FICA taxes, and the rate will depend on your total taxable income (not just wages) minus deductions (standard or itemized).
Gambling winnings are subject to a 24% withholding for federal tax, though the actual amount you owe on your gambling win will depend on your total income. That tax is automatically withheld on winnings that reach a specific threshold.
The tax calculator assumes a standard deduction of $12,400 (single)/$24,800 (married) and does not include any municipal/local taxes.
The state tax rate in New Jersey is 3%, which is the rate your gambling winnings are taxed. These are broken up differently starting with your Marginal tax rate which is the bracket your income falls into. Then you have your Effective tax rate which is the actual percentage you pay after standard deductions, etc., and operate on a sliding scale depending on filing status and total taxable income. The rules state that when gambling, a person's winnings are to be combined with their annual income; which could move them into a higher tax bracket, hence why it’s important to be aware of gambling income before starting tax preparation.
How to pay taxes?
The first step is to understand that all gambling winnings are completely taxable and the income must be reported on your tax return. Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos. It also includes cash winnings and the fair market value of prizes, such as cars and trips. Depending on the amount of winnings, bettors may receive a W-2G form,
which is sent by the payor (casino, pari-mutuel operator, sportsbook, online casino, online sportsbook, etc). The form reveals the amount of winnings and if any tax was withheld. A copy of that W-2G is sent to the Internal Revenue Service.
You must report all gambling winnings as "Other Income" on Form 1040 or Form 1040-SR, including winnings that aren't reported on a W-2G. When you have gambling winnings, you may also be required to pay an estimated tax on that additional income.
If your winnings were non-cash prizes, such as an automobile or vacation trip, the IRS instructs you to report the fair market value of each prize. Non-residents with winnings at New Jersey casinos or racetracks are still subject to New Jersey state tax.
Calculating Taxable Income
You may use your gambling losses to offset gambling winnings from the same year as long as they do not exceed your total winnings. If your losses were greater than your winnings, you cannot report the negative figure on your New Jersey tax return. You must claim zero income for net gambling winnings. For more information, see TB-20(R), Gambling Winnings or Losses.
You may be required to substantiate gambling losses used to offset winnings reported on your New Jersey tax return. Evidence of losses can include your losing tickets, a daily log or journal of wins and losses, canceled checks, notes, etc. You are not required to provide a detailed rider of gambling winnings and losses with your New Jersey tax return. However, if you report gambling winnings (net of losses) on your New Jersey return, you must attach a supporting statement indicating your total winnings and losses.
Who do the taxes get paid to?
The payor of gambling winnings is required to file Forms W2-G with the IRS by the last day of February of the year following the year of prize award. Form 1096, "Annual Summary, and Transmittal of U.S. Information Return," is used to transmit the Forms W2-G to the IRS. Forms are only filed with the New Jersey Department of Treasury when withholding is required.
Gross revenue from casino online sports pool operations is subject to a 13% annual tax, which shall be paid to the Casino Revenue Fund. Additionally, an investment alternative tax of 1.25% will be used exclusively for tourism and marketing programs for the City of Atlantic City.
Reporting the Federal Tax
Form 945, "Annual Return of Withheld Federal Income Tax," is used to report and pay the monies withheld to the IRS. Form 945 is an annual return and is due January 31 of the year following the year in which the taxes are withheld. Be sure to mark the Form 945 checkbox on Form 8109, Federal Tax Deposit Coupon.
The federal employer identification number (FEIN or EIN) of the organization conducting the raffle is required to be listed on Forms W2-G, 1096, and 945. If you have not secured an EIN, you may apply for one on the Form SS-4, "Application for Employer Identification Number," available from the IRS.
You may deduct gambling losses only if you itemize your deductions on (Form 1040) and keep a record of your winnings and losses. The number of losses you deduct can't be more than the amount of gambling income you reported on your return. Claim your gambling losses up to the amount of winnings, as "Other Itemized Deductions."
So if you had $4,000 in winnings and $10,000 in losses last year, your deduction would be limited to $4,000. The remaining $6,000 cannot be carried over.
The IRS may request that you substantiate gambling wins and losses.
Your documentation may include:
- Form(s) W-2G.
- Form 5754 (group gambling winnings)
- Wagering tickets with dates, location, and amounts won/lost. Also provide names of anyone who gambled with you, if applicable.
- Canceled checks or credit records.
- Financial and bank statements.
New Jersey Lottery winnings from prize amounts exceeding $10,000 are taxable. The individual prize amount is the determining factor of taxability, not the total amount of Lottery winnings during the year.
- For example, if a person won the New Jersey Lottery twice in the same year, and the winning prize amounts were $5,000 and $6,000, these winnings would not be subject to New Jersey Gross Income Tax. However, if that person won the Lottery once and received a prize of $11,000, the winnings would be taxable.
- This standard for taxability applies to both residents and nonresidents.
- The New Jersey Lottery permits donating, splitting, and assigning Lottery proceeds to someone else or to a charity. If you choose to donate, split, or assign your Lottery winnings, in whole or in part, the value is taxable to the recipient in the same way as it is for federal income tax purposes.