Gambling and prediction market taxes in the US

This guide explains the federal and state rules as of September 30, 2026. It is general information, not tax advice — tax rules change, and your situation may differ. Talk to a tax professional before you file.

Are gambling winnings taxable?

Yes. The IRS says all gambling winnings must be reported as income, whether or not you receive a tax form. That includes online casino and sportsbook winnings, lottery prizes, fantasy sports winnings, and the fair market value of non-cash prizes such as cars or trips.

Casual players report winnings on Schedule 1 of Form 1040. Professional gamblers — people in the business of gambling — report on Schedule C and owe self-employment tax. Promotional winnings count too: money you win playing with a casino bonus is gambling income like any other.

Form W-2G: the new 2026 thresholds

A Form W-2G is the information return a casino, sportsbook or lottery sends you — and the IRS — for certain large wins. The 2025 “One Big Beautiful Bill Act” raised the threshold for payments made after December 31, 2025:

From 2027 the $2,000 threshold will be adjusted for inflation each year. Two practical points:

• Most sports bets never produce a W-2G, because the win has to be at least 300 times your stake. The winnings are still taxable.
• The threshold is for reporting, not for tax. A $500 slot win is taxable even though no form is issued.

Withholding

Casinos and sportsbooks withhold federal tax in some cases:

• Regular withholding of 24% applies when your winnings minus the wager exceed $5,000 and come from lotteries, sweepstakes or wagering pools, or from sports and other wagering at 300-to-1 or longer. It doesn’t apply to slots, bingo or keno.
• Backup withholding of 24% applies to reportable wins — including slots — if you don’t give the payer a correct taxpayer identification number.

Withheld tax is credited against your tax bill when you file. You’ll need to show two forms of ID to collect a reportable win.

Deducting losses: the new 90% rule

You can deduct gambling losses only if you itemize on Schedule A, and only up to the amount of your winnings. Starting with the 2026 tax year, there’s a further limit: you can deduct just 90% of your losses. In formula terms, your deduction is the smaller of 90% of your losses or your winnings.

That creates taxable income even in a year when you broke even:

To wipe out your winnings completely you now need losses of about 111% of them. And if you take the standard deduction — $16,100 for single filers and $32,200 for married couples filing jointly in 2026 — you can’t deduct gambling losses at all.

The new rule also applies to professional gamblers: their business expenses count as wagering losses and fall under the same 90% limit, so they can’t report an overall loss from gambling either.

Will the 90% rule be repealed?

Possibly, but not yet. On September 16, 2026, the House Ways and Means Committee voted 38–5 to restore the full deduction as part of H.R. 10357, and the change would apply to 2026 returns if enacted. It still needs a vote in the full House, passage in the Senate and the President’s signature, and a House vote isn’t expected before the November 2026 midterms. For now, the 90% limit is the law for 2026.

Keep records

Because the IRS can ask you to prove your losses, keep:

• a log of each session or bet: date, type of game or market, where you played, and amounts won and lost;
• statements from casinos, sportsbooks and prediction market platforms — most let you download an annual win/loss or profit-and-loss statement;
• every Form W-2G and record of tax withheld.

State taxes on gambling winnings

Most states with income taxes tax gambling winnings too. In the states with legal online casinos, for example:

• New Jersey taxes gambling winnings at its regular income tax rates, up to 10.75%, and applies to non-residents’ winnings from New Jersey. It lets you offset same-year winnings with losses (not below zero), with no 90% haircut, and withholds 3% on some payouts.
• Pennsylvania taxes gambling and lottery winnings as a separate class of income at the flat 3.07% rate. You can deduct the cost of wagers in the same year from winnings in that class, but a net loss can’t offset other income.
• Michigan taxes winnings at its flat 4.25% rate for 2026. Check the Michigan Department of Treasury for how wagering losses are treated.

If you win in a state where you don’t live, that state may tax the winnings, and your home state generally gives you a credit for tax paid to the other state. Online casino players must be physically inside a licensed state to play, so those winnings are usually taxable there.

How prediction market profits are taxed

This is the unsettled part. The IRS has issued no specific guidance on event contracts, and its 2026 instructions for Form 1099-B don’t mention them. There are three possible treatments, and none has been confirmed:

1. Gambling income. Profits would be ordinary income, and losses deductible only if you itemize — and only at 90% of losses from 2026.
2. Capital gains and losses. Gains and losses would go on Form 8949 and Schedule D, and net losses could offset other capital gains plus up to $3,000 of ordinary income a year.
3. Section 1256 contracts (taxed 60% long-term, 40% short-term). This looks unlikely: fully collateralized event contracts don’t clearly meet the requirements for regulated futures contracts, and the section excludes swaps, which is how the CFTC describes most event contracts.

What the platforms say they report, as of September 2026:

Robinhood’s own guidance sums it up: the IRS “hasn’t issued specific guidance,” and taxes are your responsibility. Keep a record of every trade, fee and settlement, and ask a tax professional how to report them. Interest paid on your balance — such as Kalshi’s APY or ForecastEx’s incentive coupon — is a separate item from trading profits.

Non-US residents

Gambling winnings paid to nonresident aliens generally face 30% withholding and are reported on Form 1042-S instead of a W-2G, although winnings from blackjack, baccarat, craps, roulette and big-6 wheel are exempt. Nonresidents generally can’t deduct gambling losses unless they’re residents of Canada or a tax treaty says otherwise.

The bottom line

Report every win, keep records of every loss, and remember that from 2026 even a break-even year can leave you with a tax bill if you itemize. Prediction market profits are taxable too, even if the right way to report them isn’t settled yet. For where to play legally, see our rankings of the best online casinos in the US and the best prediction markets in the US.