Will I Have To Pay Taxes on Free Play Won in a Contest?

I'm currently a finalist in a contest in a casino near my home in Pennsylvania. The grand prize is $10,000 in free play, with various lesser prizes down to $1,000 for the finalists. Are they all considered income for tax purposes? Will I be required to fill out a tax form if I win between $1,000 and $10,000?

The end of the tax year for individual filers is a mere week away, so we're receiving the start of what usually turns into a flood of queries about gambling and taxes between now and April. This is an interesting one.

As we state often, in fact pretty much in the beginning of every question about taxes, the IRS considers all prizes and other "wins" as income, no matter what form they come in and whether or not you get any tax paperwork. Even if a W-2G or 1099 isn't issued, all gambling winnings must be reported as taxable income.

As for your second question, it's tough to predict what a casino will do in any situation, especially on tax issues. So the answer has to be: Maybe or maybe not.

It’s standard that winners of non-gambling prizes are issued Form 1099-MISC for prizes worth $600 or more. But much isn’t "standard" when you’re talking about the policies of various casino companies. Some issue that form for a win of $600 or more in one tournament, while others add all the tournament wins of any amount for one person in one year and issue a 1099 for the aggregate prizes that total $600 or above. And to complicate matters, some casinos issue a W-2G instead of a 1099.

And do you want to be even more amazed? Sometimes the casino won’t give you any paperwork at the time of the win but, bam! You receive a 1099 or W-2G in January!

These questions bring up many others, particularly when you have to declare your free play. When it's issued? When you play it through? When you cash out what's left? This is complicated stuff.

Luckily, our book Tax Help for Gamblers addresses all of these issues. In this case, we suspect that even your tax accountant isn't familiar with the ins and outs of casino contests and prizes and free play and the like. At least with the book, you can educate yourself and, if necessary, your tax preparer.

Will I be required to fill out a tax form if I win between $1,000 and $10,000 worth of free play in a casino contest?

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Boogieman888 Dec-24-2019

Really

Is this the 1st time you have charged to answer a question of the day?
Merry Christmas

SoCalDude Dec-24-2019

Boogieman WTF You talking about!

Who got charged to answer the QoD?

Deke Castleman Dec-24-2019

Buying the book

What Dude means is that we didn't post a complete response to a question that requires a chapter in a book to answer -- and even that isn't definitive. How many of you think we should post the entire chapter of Tax Help for Gamblers on today's QoD page?

David Dec-24-2019

If you drive a car ...

... I'll tax the street. If you try to sit I'll tax your seat. The government is out of control with taxing its citizens. Winnings of any sort should not be taxable.

rokgpsman Dec-24-2019

QOD

I think the answer to today's question was complete enough, if someone wants more details they can research it further by talking to a tax person, buying the book mentioned, etc. Tax policies and laws change often, and each person's home state may have different tax treatment for the state income tax. So if you have gambling winnings it's best to seek out expert advice tailored to you. Don't forget that often you can reduce or entirely cancel taxes on winnings if you can show that you have gambling losses. Many casinos will give you a statement of your gambling wins/losses, with Boyd gaming I think it is offered online at their B-Connected website.

Jackie Dec-24-2019

Ahh Taxes!

Complain to your Congressman not here! Our National debt is $20 Trillion and we can't even afford the interest on that plus your Congressman wants to up the National Debt ceiling from $20 Trillion to $24 Trillion.  If you don't vote, you are the problem.  If you only vote the party line, you are the problem.  If you vote for anyone not wanting to lower our National Debt, you are the problem.  You want to stop the taxation of winnings?  Get Congress to stop it's reckless, irresponsible, overinflated budget spending!  Otherwise shut up and suffer the consequences of your inactions.

Kevin Lewis Dec-24-2019

What's free play worth?

The law is that it's taxable at face value. Its true value to you might be somewhat less, but the situation is very similar to if you won a car on a game show, you'd be taxed on its full retail value, even though if you ran out and bought the car, you'd probably pay less.

So the real question is whether the casino reports it, i.e., gives you a 1099 or a W2-G. The threshold for the former is $600, the latter $1200. So you might get either one.

In my experience, when you win a (substantial) prize in a drawing, you get a tax form for the retail value of the prize. Casinos tend to be fairy scrupulous about this because drawings and drawing winners are public and somewhat prominent. And of course, it's no skin off their noses to hit you with a tax form.

Paul Polsky Dec-24-2019

Deducting Gambling Losses

Yes, you CAN deduct losses against all winnings in a year, HOWEVER, it can ONLY be done if itemizing deductions on the return.  That is a lot harder today than in 2017 and before when the law was more advantageous.

Kevin Rough Dec-24-2019

Freeplay isn't taxable...

...it's what you win from that free play that is.

Let's say that you won $10,000 in free play and decided to play $1 video poker with it.  Also say that you were lucky enough to hit 2 royal flushes with it.  You would get 2 Forms W-2 each for $4,000: one for each royal flush.  And of course you would report all of the winnings on your 1040 as required by law.

Also don't allow the casino to take Pennsylvania withholding.  Put money away for it.  It is my experience that the PA Department of Revenue doesn't keep good records on casino withholdings.

Sandra Ritter Dec-25-2019

1099-MISC vs W2-G

My brother won $750 of free play a couple of years ago at Horseshoe Hammond. He received a 1099-MISC with $750 in Box 3, Other Income. This is not viewed as a gambling win. You have to report it on Line 21, Other Income, but you don't get to write off losses against it because it's not viewed as Gambling Income. (I'm a CPA and I prepare my brother's tax return.)

IdahoPat Dec-26-2019

Kevin Hough speaks the truth

I know first-hand based on my job in the business that free slot play does not require a 1099. That said, we were behind the times when we were instructed to no longer issue 1099s on free play, about 4-5 years ago. Of course, if you hit something off that free slot play that breaks the $1,200 threshold, get ready to pay Uncle Sam.

In very extreme situations, request to speak with someone in Title 31 compliance. Virtually every casino of note has someone in that position. You might not be able to get to them at the drop of a hat on a Saturday night, but every single supervisor position or higher on a casino floor knows their Title 31 director by name. It's far from an outlandish request for what should be viewed as extreme, unusual cases.

Question of the Day - 24 December 2019

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