HomeCalifornia Gambling Taxes

California Gambling Taxes

On this page, you will find out all you need to know about California gambling taxes, including the tax rate, a handy tax calculator, and much more.

Johnny Covers By: Johnny Covers
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On both a state and federal level, California imposes taxes for all gambling winnings produced in the state. Primarily focused on winning from California casinos, which are mostly located on tribal lands throughout the state, California gambling taxes are a critical gaming topic to be aware of in the state. Also applicable to winnings from the California Lottery, poker, and other gaming winnings, California gambling winnings are itemized on your state and federal tax return.

Do you have to pay tax on gambling in California?

Yes, you have to pay tax on gambling winnings in California, as they are considered income and subject to both state and federal taxes. On a federal level, gambling winnings are taxable, which includes earnings from the California Lottery, casinos, horse racing, and other forms of gambling. While some of these winnings will be subject to income tax withholding at the time of payment, you still must also report them on your federal tax return.

State taxes are also applicable when paying tax on gambling winnings in California, and you are not permitted to deduct gambling losses like you can in some states. With that in mind, all gambling winnings must be reported on your state income tax return, as well.

When you win gambling via legal operators in California, you will receive a Form W-2G if your winnings are above certain thresholds. For slot machines and bingo, the amount is $1,200, Keno is $1,500, and poker tournaments are $5,000+. It’s important to note that even if you do not receive a form, at the above thresholds, it’s required to report all winnings.

If you are someone who gambles often, it’s a good idea to keep detailed records of your wins and losses throughout the year so you can report your California gambling tax record accurately. While you can not report pure losses, you can deduct your losses from your winnings as itemized deductions on your Federal tax return. For your California state taxes, however, these losses do not reduce your winnings.

What are the gambling tax rates in CA?

California State Gambling Taxes

In the state of California, all gambling winnings are taxed at the same rates as regular income. This means that there is not a specific California gambling tax rate, but instead, the rate depends on your total income for the year. Generally speaking, California’s income tax rates are on a sliding scale, running from 1% to 12.3% with an additional tax of 1% for mental health services if your income is more than $1 million. Below are the tax brackets for California single filers, as of the latest (2023) information available:

  • 1% on the first $8,932 of taxable income
  • 2% on taxable income between $8,933 and $21,175
  • 4% on taxable income between $21,176 and $33,421
  • 6% on taxable income between $33,422 and $46,394
  • 8% on taxable income between $46,395 and $58,634
  • 9.3% on taxable income between $58,635 and $299,508
  • 10.3% on taxable income between $299,509 and $359,407
  • 11.3% on taxable income between $359,408 and $599,012
  • 12.3% on taxable income over $599,012

As noted, if your taxable income is more than $1 million, California adds an additional 1% for the Mental Health Services tax, bringing the top state income tax rate to 13.3%.

Federal Gambling Taxes

California gambling winnings are also subject to Federal income tax, which considers gambling winnings taxable income and is taxed at the federal income tax rates. These rates also vary depending on your total taxable income and filing status, and below is a schedule for single filers in 2023:

  • 10% on taxable income up to $11,000
  • 12% on taxable income over $11,000 to $44,725
  • 22% on taxable income over $44,725 to $95,375
  • 24% on taxable income over $95,375 to $182,100
  • 32% on taxable income over $182,100 to $231,250
  • 35% on taxable income over $231,250 to $578,125
  • 37% on taxable income over $578,125

Larger gambling winnings will likely have federal tax withheld when paid out, which typically comes in the form of a flare rate of 24%. With federal gambling taxes, you can also itemize your deductions to net out gambling losses from your winnings in a given year.

Tax calculator for gambling in California

Calculating taxes on your gambling winnings in California requires taking a number of factors into consideration, both on a federal and state income tax basis. Luckily, there are gambling tax calculators available that you can use in any state to determine the taxes owed.

A few pieces of information you should have readily available are the state you are located in (California), filing status (Single, Married, Head of Household, or Surviving Spouse), total annual taxable income, and gambling win amount. 

How can I file taxes for California gambling winnings?

While taxes in general can be a daunting task, filing taxes for California gambling winnings is necessary. Below, we’ve boiled down the process into four straightforward steps.

  1. Gather Documents: For big wins from legal operators, you will receive documentation including a W-2G form showing proof that your winnings were reported. If you are gambling often, it’s a good idea to keep a detailed record of your winnings and losses so you can accurately claim deductions on your losses (for your Federal tax return only).
  2. Complete Federal Tax Return: All of your gambling winnings, less any itemized deductions for losses up to your gambling winnings amount, must be included as income on your Federal tax return on Form 1040. The itemized deductions portion will go against your winnings on Schedule A.
  3. Complete State Tax Return: The same gambling winnings from step #2 must also be listed as income on your California state tax return. Note, that the state of California does not allow you to deduct gambling losses against your winnings. Form 540 is the form you will use to file your state tax return in California.
  4. File Pay Taxes Due: Now that your Federal and State income tax returns are complete, review them one final time to ensure accuracy. You can then file both Federal and State returns electronically via sites like TurboTax, or by mail. If you owe, make sure you pay by the filing deadline to avoid costly penalties that come with interest. California has an IRS e-file system to make paying CA taxes online a breeze.

What advice do tax professionals give to frequent gamblers in California regarding tax planning?

There are a few specific pieces of advice that tax professionals give to frequent gambles in regard to California tax planning. Let’s take a look at a few of the most often given pieces of advice when it comes to California gambling tax.

  • Report All Winnings: Don’t think because you didn’t receive a tax form from a gambling operator that you should not report your winnings. All California gambling winnings should be reported to the dollar on your Federal and State income tax returns.
  • Detailed Records: Keeping meticulous records of your gambling winnings and losses, including the date, type of gambling, amount, and name of the gambling establishment is essential for accurate reporting. If you get audited, you have the exact methodology for how you came up with the amounts you reported.
  • Work With a Tax Professional: When it comes to California gambling taxes, you want to make sure you are doing them correctly. If you are unsure of how to report your gambling winnings in California or have unique circumstances, it is always worth consulting with a licensed tax professional to ensure you are doing them correctly.
  • Deductions for Losses: While your Federal taxes allow you to deduct losses from your gambling winnings in California, your State taxes do not. This means that generally speaking, your State tax liabilities will be higher than your Federal if you plan to report losses on your Federal.

What are the penalties for not reporting gambling winnings in California?

Not reporting gambling winnings in California could lead to serious consequences, on both a state and federal level. Below are a few of the possible penalties for not reporting winnings from gambling in California.

  • Underpayment Penalty: Both the state of California and the IRS can impose accuracy penalties if it’s determined you failed to report the full amount of your winnings. Typically, they can charge up to 20% of the portion that you underpaid, citing negligence or general disregard.
  • Penalty plus Interest: If you don’t pay on time, the IRS will impose a penalty of about 5% on the unpaid taxes for each month that passes, with a maximum of 25%. The state of California, via the Franchise Tax Board (FTB), can impose similar penalties.
  • Audit: By underreporting or not reporting your gambling winnings in California, you are also increasing the risk of being audited by the IRS and California’s FTB.
  • Criminal Charges: In the most severe cases, often those for the highest dollar amounts, the IRS and the State of California can bring on criminal charges for not reporting your gambling winnings. These charges could result in fines and or imprisonment.

FAQ

Where can I get more information or help with gambling taxes in California?

There are a number of resources available to get information or help with gambling taxes in California. These California Franchise Tax Board (FTB), Internal Revenue Services (IRS), licensed California Certified Public Accountants (CPAs) and Tax Attorneys, tax preparation software (i.e. TurboTax), local CA tax clinics, and responsible gambling organizations throughout the state.

Do non-residents need to pay taxes on gambling winnings earned in California?

Yes, non-residents who win money gambling in California are still subject to California state income and federal income taxes. Just like California residents, this includes winnings from CA casinos, the California Lottery, poker rooms, and more. Form 540NR is for California non-residents to fill in on their tax returns.

How are gambling winnings from lotteries or casinos taxed differently?

Generally speaking, gambling winnings from lotteries or casinos in California are taxed the same way at both federal and state tax levels. From a withholding standpoint, Federally, casinos and lotteries will automatically hold 24% of winnings for wins of $5,000 or more. From a state tax standpoint, the winnings from lotteries and casinos are taxed the same, and depending on your income tax bracket.

What should I do if I receive a W-2G form in California?

If you receive a W-2G form from a gaming operator in California, there are a few things you need to do. First review the form to ensure the numbers are accurate, which will include in detail the amount of your winnings reported. Next, keep a copy for your records and then report the gambling winnings noted on your Federal and California State tax returns. On the Federal portion of your tax return, you can also deduct losses from your winnings amount.

Author Details

Johnny Covers

Johnny Covers

Johnny Covers is a sports betting expert and author at CASportsBettingSites.com. He has shared his betting predictions for almost a decade, and his work has been featured on various websites, including FantasyPros, Sportsbook Review, OddsChecker, Betting Pros, and many more.