IRS Finalized Gambling Rules to Tattle on Your Slot Machine Play

Since I spent the end of last year in Las Vegas (though my city related activities were limited to the Mandalay Bay Aquarium and having my son tell me all about the MGM Grand Casino fire), it seemed appropriate to kick off the new year discussing new gambling tax rules issued by the IRS.

If you’re looking for something to cool you off after a hot night in Vegas, feel free to read the full final regulations over here. If you’re in for the quick fix, read on.

The IRS decided to close out 2016 with finalizing rules under Code Sec. 6041 for reporting winning from bingo, keno, and slot machine play. They’re all about getting your gambling winnings reported on your tax return.

If you pull the lever on a slot machine, or shout out bingo before anyone else, and you manage to pull in $1,200 from your winning move, the casino is required to send a slip to the IRS reporting how much you made. Note that this is a GROSS amount, so it doesn’t take into account any cash you threw down to pull in that $1,200.

Put in $50,000 to get a $1,200 win? You’re still getting a W-2G.

For keno, the threshold for the casino to tattle to the IRS is $1,500. Unlike slot machine and bingo, these gambling winnings are actually net the amount of money you put into it for that particular play session.

Why does keno have a higher threshold and allow you to net out the amount you put down? Beats me. I didn’t even know what keno was until I Googled it five minutes ago. Probably just some bored Treasury Department writer wanting to see if anyone would notice.

Both threshold amounts are surprisingly high, considering most transactions require an informational return if you pay over $600.

One thing I found interesting in the regulation was the following definition:

Slot machine. The term “slot machine” means a device that, by application of the element of chance, may deliver, or entitle the person playing or operating the device to receive cash, premiums, merchandise, or tokens whether or not the device is operated by insertion of a coin, token, or similar object.

Based on that definition, getting enough tickets at the local Dave & Busters could also net you a W-2G, assuming you win enough to pull down that gold plated stuffed gorilla.

Of course, if you make ANY money off gambling, you’re supposed to be sticking that on your 1040 (Line 21 for the 2016 return), even if the casino doesn’t rat you out to the IRS. And you can always deduct gambling losses to extent of gambling winnings, even if it’s not netted like the keno W-2G. However, those deductions will be reported on your Schedule A Itemized Deduction (Line 28), which means if you take a Standard Deduction, or your Itemized Deductions are limited for the year, you’re absolutely losing out to the IRS.

And with that pleasant thought in mind, it seems fitting to end with the phrase, “The House Always Wins.”