It is exciting to win in sports betting, but winners have to deal with issues of law immediately. The Pennsylvania Department of Revenue levies personal income tax at 3.07% if it meets the taxation threshold.
Revenue earned from sports betting, lottery, and casinos is regarded as personal income. It applies to both PA residents and visitors who gamble in the state and win. Winners must fill PA-40 Schedule T form to file a winning report. Failure to report could lead to different actions by the state government based on current law.
When sports betting winning is not taxable
Pennsylvania sports betting tax laws have provided clear guidance on when winnings are taxable. The winnings cannot be taxed until the prize is due. The amount won must be recorded in the books of the casino. If the operator is not willing to pay, you cannot be asked to pay tax. There is a challenge, though, if you receive the prize and the operator fails to record it in his books. The state government may view this as an intention to default by collaborating with the operator.
Reporting your winnings
Your first step is to report your winnings regardless of whether the casino company in Pennsylvania reported them or not. What you report is the gross winning and never net. If you spend $100 to bet and win $900, what you report is $900 but not $800. To some extent, you might deduct your gambling income and losses and report the net, but you first need to find out if there is a provision for that in law.
It is not just cashed winning that you report. If you win valuable items such as cars, laptops, TVs, and fridges, the PA state government will count it as income. Get a fair market value of the item and report the amount.
The Form W-2G
Cash and value prizes in PA are declared as other income on Form 1040. If your sports betting winning is large, you could be issued with a Form W-2G. The sports betting company is mandated to issue you with the form for winnings in the following categories:
- You win on horse race betting is from $600 and above.
- A win of $5000 and above for a poker tournament bet.
- Any large winning for any other bets on sports.
Tax rates for sports betting winnings in Pennsylvania
If you are new to betting, you need to read information about betting for beginners to understand what laws apply to sports betting in PA. The PA state government subjects sports betting winnings to the federal withholding tax of 24%. The tax is automatically withheld if it reaches the threshold. Above the 24% federal tax, the PA government withholds an extra 3.07%, counted as personal income tax. If you fail to receive Form W-2G, you must make a report on Form 1040 and also on PA-40 Schedule T for your state tax return.