Pennsylvania Online Gambling Legality & Taxes
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Residents in Pennsylvania have access to one of the most open gambling markets in the US. Their positive stance towards online gambling has allowed the industry to flourish. Locals over 21 can sign up to bet and win real money on a range of reputable PA online casinos, poker rooms, and sports betting sites. The Pennsylvania Gaming Control Board (PGCB) licenses and regulates these platforms. This organization is responsible for vetting, auditing, and ensuring each gambling platform follows state regulations and offers adequate player protection.
Customers can wager real money and remain safe with each site following responsible gambling guidelines and providing account limit tools and links to helpful orginizations. These sites operate within PA and are subject to state and federal taxes, just like players. The excellent news is that PA has a low-income tax rate, allowing players to save more than in other states. This article covers everything you need to know about taxable income for gambling and lottery winnings in Pennsylvania.
Where Can I Legally Gamble Online in Pennsylvania?
Pennsylvania is a progressive state that permits the most popular types of online gambling. Residents over 21 can enjoy hundreds of unique gambling options and special ways to win cash online. The most popular options are:
- Online Casinos: Over ten licensed online casinos operate in Pennsylvania, most of which have PA online casino apps. These sites have the best online casino games, including fun slot machines, jackpots, live dealer tables, and other exciting online gambling games.
- Online Poker: PA has four locally licensed online poker rooms. BetMGM, Borgata, Pokerstars, and WSOP. They feature fun wagering tickets, poker tournament events, and other table game entertainment like online blackjack PA variants, and online roulette PA titles 24/7.
- Online Betting: There are currently 11 PA online sports betting apps. You can wager on pre-match, futures, and live betting markets for popular US sports, including NBA, NHL, MLB, and MLS.
- Online Lottery: Lottery is legal in Pennsylvania. The Pennsylvania Lottery provides access to various state-run lotto events and partner offers for multistate lotteries with incredible prizes. Winning non cash prizes like Cars requires reporting the fair market value.
Are There Any Responsible Gambling Measures in Place?
Each and every new PA online casino has to be partnered with a retail casino and licensed by the Pennsylvania Gaming Control Board. The company must follow strict regulations to ensure each player is 100% protected and can access responsible gambling help and account tools. The dedicated responsible gambling page has the essential information.
Here, you can find links to external organizations that can assist with any questions and offer help for problem gambling. Inside the account, they provide options to set daily, weekly, and monthly limits for deposits and losses. These adjustable settings allow players to remain within their budget, play responsibly, and minimise gambling losses when chasing gambling and lottery winnings.
What is The Tax Rate for Online Gambling in PA?
In Pennsylvania, online gambling and lottery winnings are taxable income, and players are responsible for reporting this to the IRS and the PA Department of Revenue. PA residents must pay state income tax rates of 3.07%. Certain gambling winnings above thresholds are subject to federaltax. Customers who provide their social security number may pay a 25% federal tax, and those who don’t submit their SSN are subject to a higher 28% rate.
The New Regular Withholding Rate
The new regular gambling withholding rate for online gambling winnings over $5,000 is a flat rate of 24%, a slight reduction from the previous 25%. These new rates came into play for the tax year after 2017. It applies to winnings from a range of gambling activities including Lotteries, Pari-mutuel, and Sweepstakes. So, Pennsylvania lottery winnings over $5,000 will have the 24% tax rate withheld by the operator and displayed on the W2-G form.
Federal Form W-2G, Certain Gambling Winnings
A W-2G is a federal form that online gambling operators must supply to customers and the IRS when the winnings reach a certain level. Online casinos and other platforms are legally required to issue eligible customers with the form and should send it out annually. If you don’t receive the W 2G form, ensure the casino has your updated address and contact details, and request the form from support.
The form lets the customers and the federal IRS know about the player’s gambling or lottery activities, including total wins, losses, and any taxes withheld. It’s only required after the winnings exceed the minimum thresholds.
We've listed the different types of gambling activities and the thresholds below. After reaching these levels of gambling and lottery winnings, the provider will issue a W-2G form. Each type of gambling has the same 3.07% state and 24% federal tax rates.
- Pennsylvania Lottery: $600
- Pari-mutuel: $600+ or 300x the wager
- Sports Betting: $600+ or 300x the wager (After Reducing Wagers)
- Online Bingo: $1,200
- PA Online Slots: $1,200
- PA Keno: $1,500 (After Reducing Wagers)
- PA Online Poker: $5,000 (After Reducing Wagers)
How to Report PA Gambling Winnings on Taxes
Pennsylvania residents must report gambling and lottery winnings to the local DOR and Federal IRS. Follow these steps to learn how to report your PA taxes on gambling winnings.
- You should receive a W2-G form from your gambling provider, or you can request them to send one. It details your gaming activity, including total wins and losses, so that you can calculate your net gambling winnings and work out your taxes.
- Visit the IRS site and download Form 1040 (US Individual Income Tax Return) and Form 1040 Schedule 1 (Additional Income).
- If the gambling provider withheld taxes, you can input this amount under Other Income on the Schedule 1 form and number 8 (Other Income) on the federal W2-G form.
- View the W2-G form to see how much tax was withheld, and add this amount to the Federal Income Tax Withheld section on Form 1040.
- Fill each form out with your total gambling winnings. You can deduct losses from your gambling winnings. You must download Form 1040 Schedule A from the IRS to itemize the deductions.
- Residents must report Pennsylvania taxable winnings on gambling income to the Pennsylvania Department of Revenue. Visit the website to submit online or download, complete, and sign the PA-40 Schedule T (Pennsylvania Personal Income Tax Form), and pay taxes.
Can I Deduct My Losses?
If you’re responsible for paying your taxes, it’s best to stay on track with your gaming or request detailed statistics for your history. It can help you itemize tax return deductions to reduce your taxable income. However, it’s important to remember you can’t deduct more than your total winnings. For example, if you win $5,000 and lose $10,000, you can only deduct $5,000 and must pay tax on the remaining balance.
If you wish to deduct your gambling losses, you will need to select Itemised Deductions in Form 1040 and get a copy of Schedule A (Itemized Deductions). You can enter the total loss amount to deduct it from the taxable income. It’s best to keep detailed records of betting slips, wagering activity, deposits and withdrawals, credit or bank transfer receipts, and other documents to assist with the process.
- Visit the IRS website and download Schedule A (Form 1040).
- View your W2-G form and get copies of your gambling activity to work out the total wins and then subtract the losses to work out a total.
- List the total itemized deductions at the bottom of the form.
- Include this amount in your state income tax and federal government income tax returns to deduct it from the calculation and determine the income to pay tax on.
What If I Don't Receive a Form W2-G?
Suppose you grabbed that PA casino bonus or PA online casino no deposit bonus and won big from online gambling, it's considered taxable income, and you must receive a W2-G form to file your taxes. Typically, the online site should send this out to customers, so first check your address and email are up to date.
You can request one from their customer support team if they fail to send the form. Explain your situation and tell them you haven’t received form W2 G, and the operator will arrange for the company to send one out.
What Happens If I Don't Report Gambling Winnings?
Suppose you fail to stay on top of your gambling winnings and taxes. In that case, it could become a stressful situation with a significant impact on your wallet. While the IRS understands customers may occasionally submit late, they expect citizens to complete their personal income tax returns regularly.
Failure to do so may result in a 5% monthly interest charge, adding up to 25% of the total value. It can snowball quickly, and you could pay up to 25% extra for not submitting. Failure to include gambling winnings in taxes falls under Unreported Income, which may result in a 20% penalty.
PA Lottery Winnings & Taxes
PA has a booming lottery industry, and many small-time players will be happy to hear they don’t need to include wins totaling less than $600 from their lottery tickets in their taxable income. If customers have over $600 in annual Pennsylvania state lottery income, then it’s included as taxable income, and the lottery operator will send a W2 G form with the annual activity to customers and the IRS.
If lottery prizes exceed $5,000, the provider will withhold 24% of federal tax and display these details when they send out the annual forms. PA state taxes for the lottery are 3.07%. One thing to consider with lottery wins is the size of the prize. If it’s a substantial payout, opting for regular payments instead of a lump sum could help keep you in a lower overall income tax bracket for the year.
What Happens If I Win the Lottery With a Group of People?
Gambling, wagering pools and lottery activities with friends makes things slightly more complicated at tax time. Group participants must download the IRS Form 5754 (Statement by Persons Receiving Gambling Winnings). It provides the required fields to enter each group member's details and the total amount each participant received.
Under current legislation, PA group lottery payouts can’t exceed $2,500 per individual unless the group win is over $50,000. After determining the total amount from your group lotto win, add this figure to your state and federal income tax returns under Other Income. Winnings incur the same 24% federal and 3.07% tax as regular lottery wins.
Taxes on Multistate Lotteries
There’s nothing more exciting than ordering a lotto ticket to the Mega Millions or Powerball and wishing for a million-dollar dream to come true. Pennsylvania residents can visit the PA Lottery site to wager and win local and multistate lottery prizes, including events with the biggest payouts in the US.
After playing and winning multi state lottery prizes, you must report the income if the winnings exceed $600. The PA Lottery should issue form W 2G to help with this process and alert the IRS. So, any wins on multistate lotteries incur the 3.07% Pennsylvania personal income tax + 24% federal rate and any additional percentages if placed in higher tax brackets after they have multistate lottery prizes awarded.
Sports betting winnings and taxes
Sports betting is big business in PA, and some fantastic online sportsbooks offer gambling facilities. With an open industry, many punters flock to these sites and wager on the top US sports yearly. Sports betting falls under the same categories as other gambling winnings and incurs gambling taxes. The threshold is $600 or 300x the wager, and locals must pay 24% federal and 3.07% local PA tax on winnings over these amounts.
Like other gambling winnings in PA, sports bettors who keep track of their expenses, wins, and losses can potentially itemize deductions to reduce the amount of payable tax. If you win over $600 in the year, the online sportsbook will supply a form W 2G to you and the IRS detailing the amount of money wagered, lost, and any amount withheld for federal taxes. To comply, you must enter this figure in your state and federal income returns.
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FAQs
Is online gambling legal in PA?
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Online gambling has boomed in Pennsylvania after the state approved the Expanded Gambling Act in 2017. This new legislation legalized and regulated online casino games, poker rooms, and sportsbooks to operate in the state, and the first sites started in 2019. Locals can also play online bingo and wager on the Pennsylvania state lottery.
What is the legal gambling age in Pennsylvania?
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To gamble online in Pennsylvania, residents must be at least 21. It's the same as gambling at land-based establishments in the state and ensures only adults participate. PA sites will verify the identity of each player to ensure all are above the legal gambling age.
Are gambling winnings taxable in Pennsylvania?
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If you bet online and win gambling income, it may be taxable depending on the amount. Annual wins over $600 on Pari-Mutuel horse racing, Lottery, and Sports Betting are taxable and require form W 2G. In comparison, the threshold is $1,200 for Bingo and Slot Machines, $1,500 for Keno, and $5,000 for Online Poker Tournaments.
Do you have to claim online gambling winnings on taxes?
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Residents must include the Pennsylvania source income, including casino winnings and other prizes from gambling on their income tax returns to comply with state and federal tax regulations. The process includes submitting the PA 40 Schedule T form. Taxable gambling in Pennsylvania is 3.07%, and the federal rates start at 24%.
Do I have to tell the IRS about online gambling?
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Online gamblers who win money in Pennsylvania must report the income to the federal tax agency, the Internal Revenue Service (IRS). You can acquire a W2-G form to view your total gambling wins. Then, start paying taxes by filing the form PA-40 Schedule T and Form 1040 for your federal income tax purposes.
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