As the gambling industry has evolved in Illinois, there is one thing that has not changed – paying taxes on your winnings. Fortunately, the Land of Lincoln has a straightforward process when it comes to paying gambling taxes.
If you are a resident of the Prairie State, and won money at in-person casinos or via online gambling in Illinois, then it’s important to brush up on Illinois gambling tax information in order to be compliant with state and federal laws.
Are Paying Gambling Taxes Required By Law?
In the United States, regardless if it is recreational gambling or not, taxes must be paid on winnings. The IRS states that gambling establishments are generally required to issue a Form W-2G for winnings of more than $600.001.
For winnings greater than $5,000, the gambling establishment may be required to withhold 24% of the proceeds for federal income tax2.
- According to TaxSlayer, the threshold for receiving a Form W-2G is $1200.00 on a slot machine or bingo hit.
- In keno, gamblers can expect to receive a Form W-2G if they win $1500.00 or more.
- Winnings from a poker tournament have the highest threshold of $5000.00 before a W-2G Form is issued3.
Generally, the property that issued the W-2G will fill out the required information before you receive it. It is your responsibility to transfer the amount listed on Form W-2G to Form 1040 under Other Income.
What If You Don’t Receive A W-2G?
There is often confusion regarding the Form W-2G thresholds. For instance, what if you won less than $600.00 betting on sports in Illinois and don’t receive a W-2G?
Regardless if a gambler receives a Form W-2G or not, Illinois gambling tax and federal tax rules stipulate that winnings of any amount must be reported.
The IRS notes that all gambling winnings, including winnings that aren’t issued on a Form W-2G, are required to be reported.
Gamblers must fill out Form 1040 or Form 1040-SR to complete this process3. In some cases, you might receive a 1099-MISC.
Illinois Gambling Taxes
Depending on which state the gambling establishment is in, the rules will vary. It is important to understand how much you might potentially owe for your Illinois gambling tax on winnings.
The state of Illinois treats gambling winnings as personal income. As a result, the standard tax rate in Illinois applies to gamblers. Gambling winnings should be reported on Form IL-1040, Individual Income Tax Return4.
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Illinois Tax Rate On Gambling Winnings
Illinois is one of nine states that have a flat tax rate for income earners for 2022. In other words, every resident, regardless of income, will pay the same tax rate5.
The Illinois tax rate on gambling winnings is a flat rate of 4.95%. This is consistent with the Individual Income Tax rate of 4.95% in Illinois6.
Residents in Illinois are encouraged to fill out a Schedule M Form to report how much was made from gambling. Additionally, Schedule IL-WIT should be completed if there have been any winnings withheld.
Schedule M allows the taxpayer to calculate the total amount of additions they must include on Form IL-1040, Individual Income Tax Return, Line 3, and subtractions that may be claimed on Line 77.
In-depth instructions for completing Schedule M can be found on the Illinois Department of Revenue website. We suggest contacting an income tax professional with experience in Illinois gambling taxes if you need additional help.
Illinois Tax Credit For Gambling Winnings
There are a couple of important points to be aware of when it comes to gambling tax credits in Illinois.
The Schedule M Instructions indicate that “The Illinois Department of Revenue does not allow deductions from gambling losses incurred8.“
So, what does this mean? In summary, state law does not allow itemized deductions for Illinois gambling tax purposes. Tax liability cannot be reduced through gambling losses.
According to the Journal of Accountancy, there are certain states that do not permit gamblers to deduct their gambling losses. There are exceptions for professional gamblers, but get ready to prove it with proper documentation, receipts, and gambling records9.
It is important to note that gamblers can still itemize deductions on their federal return on Line 27 of Schedule A (Form 1040). The total amount of gambling loss deductions cannot be more than the total amount of gambling winnings10.
Tax Credit For Out-of-State Gambling Winnings
There is an Illinois gambling tax credit that benefits gamblers, but this is only for winnings from outside of the state.
For example, you go to Las Vegas and win the $1,000,000 Dragon Link progressive jackpot at The Mirage. As a result of the jackpot being above the $1200.00 threshold, the casino issues a W-2G.
If you are a full-time resident of Illinois, then make sure to complete a Schedule CR for a tax credit. The credit is used against your tax bill in Illinois for the year11.
Learn more about this Illinois gambling tax credit on the Schedule CR IL-1040 Instructions page.
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Illinois Gambling Taxes At Online Casinos
The legalization of online gambling and sports betting introduced a wave of new tax rules in some states. Online Illinois gambling taxes have been kept simple, though.
Illinois maintained the same tax rate for online gambling winnings as other forms of gambling in the state. The Individual Income Tax Rate of 4.95% applies to sports betting and online gambling winnings.
The state has a wide array of legal online casinos and sportsbooks. Private operators such as DraftKings, FanDuel, BetRivers, and Caesars are all available in Illinois. If necessary, online casinos will mail W-2G and other tax forms to your address.
Along with the state regulated sportsbooks and casinos, there are alternative online real money casinos to gamble at. Note that these casinos will not issue a Form W-2G or 1099-MISC to gamblers. It is up to the gambler to self-report their winnings to the government.
Sources
GAMBLING INCOME AND EXPENSES | Internal Revenue Service. Retrieved From “https://www.irs.gov/pub/irs-news/at-01-17.pdf”
What is Form W-2G? – Support | TaxSlayer. Retrieved From “https://www.irs.gov/instructions/iw2g“
Topic No. 419 Gambling Income and Losses | Internal Revenue Service. Retrieved From “https://www.irs.gov/taxtopics/tc419”
2022 IL-1040, Individual Income Tax Return | Illinois Department of Revenue. Retrieved From “https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/individual/il-1040.pdf”
States With Flat Income Tax Rates for Tax Year 2022 | the balance. Retrieved From “https://www.thebalancemoney.com/which-states-have-a-flat-income-tax-rate-3193306”
Income Tax Rates | Illinois Revenue. Retrieved From “https://tax.illinois.gov/research/taxrates/income.html”
2022 IL-1040 Schedule M Instructions | Illinois Department of Revenue. Retrieved From “https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/individual/il-1040-schedule-m-instr.pdf”
2022 IL-1040 Schedule M Instructions | Illinois Department of Revenue. Retrieved From “https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/individual/il-1040-schedule-m-instr.pdf”
9 Tax issues for professional gamblers | Journal of Accountancy. Retrieved From “https://www.journalofaccountancy.com/issues/2016/oct/taxes-for-gamblers.html”
GAMBLING INCOME AND EXPENSES | Internal Revenue Service. Retrieved From “https://www.irs.gov/pub/irs-news/at-01-17.pdf”
Schedule CR IL-1040 Instructions 2022 | Illinois Department of Revenue. Retrieved From “https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/individual/il-1040-schedule-cr-instr.pdf”
