Indiana Gambling Winnings Tax
Indiana deductions are used to reduce the amount of taxable income. First, check the list below to see if you're eligible to claim any of the deductions. If you are, you'll claim them when you file your annual Indiana income tax return - Form IT-40 or IT-40PNR.
Your gambling winnings are generally subject to a flat 24% tax. However, for the following sources listed below, gambling winnings over $5,000 will be subject to income tax withholding: Any sweepstakes, lottery, or wagering pool (this can include payments made to the winner (s) of poker tournaments).
There is also a 2% education cess and 1% Secondary and Higher Secondary Education Cess on this 30% tax. This brings the total tax on game show winnings to 30.9%. An additional 10% surcharge is also applicable on the winning amount if the amount is more than Rs. This TDS has to be deducted. Any taxes collected during the month but after the day on which the taxes are required to be paid shall be paid to the department at the same time the following month’s taxes are due. Slot machine and keno winnings from a gambling operation (as defined in IC 4-33-2-10) or a gambling game (as defined in IC 4-35-2-5) that are reportable for. I had Indiana state tax withheld from my gambling winnings. I am a resident of Ohio. Can I deduct these withheld taxes from my Federal and Ohio taxes? Or is there another procedure. It seems like I shouldn't be double taxed by Ohio and Indiana. Withholding on Gambling Winnings. Gambling winnings are subject to withholding for federal income tax at a rate of 24% as of 2020 if you win more than $5,000 from sweepstakes, wagering pools, lotteries, or other wagering transactions, or anytime the winnings are at least 300 times the amount wagered.
Important: Some deductions available for earlier tax years may not be listed below. Find information on prior tax year deductions on their respective webpages.
Updated March 3, 2020
- Civil Service Annuity Deduction
Details
If you received a civil service pension (nonmilitary*) and are at least 62 years of age, then you may be eligible for up to a $16,000 deduction. Beginning with tax year 2015, a surviving spouse (no minimum age requirement) may be eligible to claim the deduction.
For each qualifying individual, the deduction is limited to:- the lesser of the amount of taxable civil service annuity income included in federal adjusted gross income or $16,000,
- less all amounts of Social Security income and tier 1 Railroad Retirement income (issued by the Railroad Retirement Board) received by the qualifying individual (as reported on Form 1040, line 20a, or Form 1040A, line 14a).
Example: The taxable amount of your civil service annuity is $6,000. You received $1,200 in Social Security income. You are age 67.
Here is how to figure your deduction.
Lesser of the taxable amount of the annuity or $16,000............... $6,000
Total of Social Security/tier 1 Railroad Retirement income ........ - $1,200
Allowable deduction .......................................................................... $4,800
*See Military service deduction: Active, reserve and retirement pay for information about the taxability of military pension income.Who is eligible?
You may qualify if your federal form includes federal civil service annuity income and you are at least 62 at the end of the tax year or a surviving spouse.
Additional Forms
Schedule 2, Schedule C
- Disability Retirement Deduction
To qualify for this deduction you must have:
- Been permanently and totally disabled at the time of your retirement;
- Retired on disability before the end of the year; and
- Received disability retirement income in the tax year.
If you meet these requirements, view Schedule IT-2440.
- Enterprise Zone Employee Deduction
Details
Certain areas within Indiana have been designated as enterprise zones. These zones are established to encourage investment and job growth in distressed urban areas.
If you lived in and were an employee in one of these zones, and worked for a qualified employer in that zone, you may be eligible to claim a deduction. Your employer will provide you with a form IT-40QEC if you're eligible to claim this deduction.
If your employer provided the form IT-40QEC to you, your deduction will be one-half of the earned income shown on that form, or $7,500, whichever is less. Make sure to keep the IT-40QEC with your records as the department may request it at a later date.
Who is eligible?
Your employer will provide for IT-40QEC if you work in an enterprise zone. You must both live and work in an enterprise zone to be eligible.
Additional Forms
Schedule 2, Schedule C
- Human Services Tax Deduction
Details
You might be able to take this deduction if you lived in Indiana and:
- Received Medicaid payments;
- Were not living at home; and
- Were receiving care in a hospital, skilled nursing facility, an intermediate care facility, licensed county home, licensed boarding or residential home, or a certified Christian Science facility.*
If you meet the above requirements, see the instructions for Schedule 2, line 11 in the individual income tax booklet to see if you're eligible to claim the deduction and to help you figure it.
*An eligible Christian Science facility must be listed with and certified by the Commission for Accreditation of Christian Science Nursing Organizations/Facilities, Inc.Who is eligible?
Any Medicaid recipients who are living in a hospital, skilled nursing facility, intermediate care facility, licensed county home, licensed boarding or residential home, or a Certified Christian Science facility.
Additional Forms
Schedule 2, Schedule C
- Indiana Net Operation Loss Deduction
Details
You may take a deduction for the Indiana portion of the federal net operating loss deduction (NOL) you added back on line 2 of Schedule 1. (This will be a net operating loss deduction from an earlier year(s) carried forward to 2017.) Write the amount you deduct as a positive figure.
Note: It is possible to have an Indiana NOL without also having a federal NOL. See Schedule IT-40NOL (link to: 5695.htm) for more information.
Who is eligible?
You may take this deduction for the Indiana portion of the federal net operating loss deduction (a net operating loss from an earlier year carried forward) or if there is a state-only net operating loss.
Additional Forms
- Indiana Partnership Long Term Care Policy Premiums Deduction
Details
Indiana has a Long Term Care Insurance Program, which is an innovative partnership between the State of Indiana and private long-term care insurance companies. The premiums paid for this policy are eligible for a deduction.
The Indiana Partnership policy will have the following box of information on the outline of coverage, the application, or on the front page of the policy:This policy qualifies under the Indiana Long Term Care Program for Medicaid asset protection. This policy may provide benefits in excess of the asset protection provided in the Indiana Long Term Care Program.
Find out more about this program.
Claim the deduction on your form IT-40 Schedule 2, or IT-40PNR Schedule C.Who is eligible?
Anyone paying premiums for Indiana partnership long term care insurance.
Additional Forms
- Interest from U.S. Government Obligations Deduction
Details
If you've included any interest from U.S. government obligations on your Indiana tax return, you're eligible for a deduction.
Examples of U.S. government obligations include U.S. Savings Bonds, U.S. Treasury Bills and U.S. Government Certificates. This interest is usually reported on federal Schedule B.
Interest income reported from a trust, estate, partnership or S corporation that is from the U.S. government obligations is also deducted.
Who is eligible?
Any income that is a direct obligation of the U.S. government such as U.S. savings bonds, U.S. Treasury bills and certificates.
Additional Forms
Schedule 2, Schedule C
- Military Retirement Income and/or Survivor's Benefits Deduction
Details
The taxability of this type of income is being phased out over the next four years. Beginning with 2019, you may be eligible to deduct up to $6,250 of these benefits plus 25% of the amount received that exceeds $6,250. See the IT-40 instruction booklet for more information about these deductions.
Who is eligible?
Anyone who reports military retirement income and/or survivor's benefits is eligible.
Additional Forms
Schedule 2, Schedule C
- Military Service Deduction
Details
You are eligible to take a deduction if the income you report on your income tax return includes active or reserve military pay.
Also, if you are retired from the military or are the surviving spouse of a person who was in the military, you may be able to take this deduction if:- You were at least 60 years of age by the end of the year;
- You were receiving military retirement or survivor's benefits during the year; AND
- The total benefits received as retirement income were reported on your federal return.
This deduction is equal to the actual amount of military income received (i.e. military pay, retirement pay, and/or survivor's benefits) or $5,000, whichever is less. If both you and your spouse received military income, you may each claim the deduction for a maximum of $10,000.
Note: Military income earned while in a combat zone may be exempt (not taxed) on your federal income tax return. If that income is exempt on your federal income tax return, then it will also be exempt (not taxed) for Indiana income tax purposes. Since Indiana isn't taxing this income, your combat zone income is not eligible for a deduction.Who is eligible?
Anyone who has income that may include active or reserve military pay.
Additional Forms
Schedule 2, Schedule C
- National Guard and Reserve Component Members Deduction
Details
There is a deduction for certain members of the reserve components of the Army, Navy, Air Force, Coast Guard, Marine Corps or the Merchant Marine, or a member of the Indiana Army National Guard or the Indiana Air National Guard.
A deduction is available for the income received as a result of service on involuntary orders during the period the above members were deployed and mobilized for full-time service, or during the period the above member's Indiana National Guard unit was federalized.
See instructions in the IT-40 Instruction booklet for more information.
Who is eligible?
A member of the reserve components of the Army, Navy, Air Force, Coast Guard, Marine Corps or Merchant Marine OR a member of the Indiana Army National Guard or Indiana Air National Guard may be eligible.
Additional Forms
Schedule 2, Schedule C
- Olympic/Paralympic Medal Winners Deductions
Details
You are eligible for a deduction if you won a gold, silver and/or bronze medal from participating in the Olympic/Paralympic games. The deduction equals the value of the medal(s) won plus the amount of income received during the taxable year from the United States Olympic Committee as prize money for winning the Olympic medal(s).
Who is eligible?
Anyone who won a gold, silver and/or bronze medal from participating in the Olympic/Paralympic games.
Additional Forms
Schedule 2, Schedule C
- Private School/Homeschool Deduction
Details
You may be eligible for a deduction based on education expenditures paid for each dependent child who is enrolled in a private school or is homeschooled.
- Your dependent child must be eligible to receive a free elementary or high school education in an Indiana school corporation;
- You must be eligible to claim the child as a dependent on your federal tax return; AND
- The child must be your natural or adopted child, if not, you must have been awarded custody of the child in a court proceeding making you the court appointed guardian or custodian of the child.
Who is eligible?
If you have education expenditures for each dependent child who is enrolled in a private school or homeschooled you may be qualified for a $1,000 deduction per qualified child.
Additional Forms
Schedule 2, Schedule C
- Qualified Patents Income Exemption Deduction
Details
Some of the income from qualified patents included in federal taxable income may be exempt from Indiana adjusted gross income tax. A qualified patent is a utility patent or a plant patent issued after Dec. 31, 2007, for an invention resulting from a development process conducted in Indiana. The term does not include a design patent. You must maintain the completed Schedule IN-PAT with your records as the department can require you to provide it at a later date.
Who is eligible?
Anyone with a qualified patent, that has federal taxable income from a qualified patent may be exempt from Indiana adjusted gross income tax.
Additional Forms
- Railroad Unemployment and Sickness Benefits Deduction
Details
Benefits issued by the U.S. Railroad Retirement Board are not taxable by Indiana. Deduct unemployment and/or sick pay benefits issued by the U.S. Railroad Retirement Board on this line if:
- You included these benefits as taxable income on your federal tax return, and
- You did not already deduct these benefits on Schedule 2, lines 5 and/or 6.
Do not include any supplemental sick pay benefits on this line. Make sure to keep the statements (such as Form 1099G) issued by the U.S. Railroad Retirement Board as the department may request them at a later date.
Who is eligible?
If you were issued benefits by the U.S. Railroad Retirement Board you may be eligible.
Additional Forms
Schedule 2, Schedule C
- Recovery of Itemized Deductions, Including State Tax Refund
Details
If you included 'recovered' itemized deductions as other income on your federal income tax return, then that amount should be deducted on your Indiana income tax return.
A recovered state tax refund should be reported on its own line called 'State tax refund reported on federal return' on the deduction schedule (IT-40 Schedule 2, or IT-40PNR Schedule C).
All other recovered itemized deductions should be reported on the line called 'Recovery of deductions' on the deduction schedule (IT-40 Schedule 2, or IT-40PNR Schedule C).Who is eligible?
Anyone who completed the 'other income' line on the federal Form 1040/1040-SR.
Additional Forms
Schedule 2, Schedule C
- Renter's Deduction
Details
You may be able to deduct up to $3,000 of the rent paid on your Indiana home.
You may be able to take this deduction if:- You paid rent on your principal place of residence, AND
- The place you rented was subject to Indiana property tax.
Your 'principal place of residence' is the place where you have your true, fixed, permanent home and where you intend to return after being absent.
Rent paid for summer homes or vacation homes is not deductible.
You cannot claim the renter's deduction if the rental property was exempt from Indiana property tax. Examples of this type of property are:- Government owned housing;
- Property owned by a nonprofit organization;
- Student housing;
- Property owned by a cooperative association; and
- Property located outside of Indiana.
How much rent can I take off? You can deduct up to $3,000 or the amount of rent paid, whichever is less.
Example: Emily paid $4,800 in rent on her principal residence. She will claim a $3,000 renter's deduction.
Example: Bill paid $400 in rent at his first apartment, moved to another location and paid $3,300 for the remainder of the year. His deduction will be limited to $3,000 even though he paid $3,700 altogether.Who is eligible?
Anyone who paid rent on your principal place of residence AND rented a place that was subject to Indiana property tax.
Additional Forms
Schedule 2, Schedule C
- Repayment of Previously Taxed Income Deduction
Details
You may be able to claim a deduction for the repayment of previously taxed income, also known as “claim of right,” if:
- You reported the income to Indiana in a previous year,
- You repaid some or all of it this year, and
- For federal tax purposes, you are eligible to:
- claim the repayment as an itemized deduction, or
- claim a credit based on the repayment amount.
Example: Ryan was a full-year Indiana resident in 2018, and received $1,700 unemployment compensation that year. He reported the full amount on his 2018 federal and Indiana income tax returns. Early in 2019 Ryan found out he had to repay $345 of that compensation; he repaid it that June. For 2019 federal tax purposes he is eligible to claim an itemized deduction* based on the $345 amount repaid. Ryan is eligible to claim the $345 amount as a repayment of previously taxed income as a deduction on his 2019 state tax return.
*In this example Ryan is not required to claim itemized deductions when figuring his federal taxable income; he may have opted to use the standard deduction instead. Regardless, he is still eligible to claim the deduction on his state tax return.
Important: Indiana does not tax Social Security income. Therefore, if you repaid some Social Security income during the year, it is not eligible for a deduction based on being repaid (because Indiana did not previously taxed this income).
See the IT-40 instruction booklet for more information about the Repayment of Previously Taxed Income.Who is eligible?
Anyone who has:
- reported income to Indiana in a previous year
- repaid some or all of it this year AND
- for federal tax purposes is eligible to claim the repayment as an itemized deduction or claim a credit based on the repayment amount
Additional Forms
Schedule 2, Schedule C
- Residential Homeowner's Property Tax Deduction
Details
You may be able to take a deduction of up to $2,500 of the Indiana property taxes paid on your principal place of residence. Your principal place of residence is the place where you have your true, fixed home and where you intend to return after being absent.
Who is eligible?
Anyone who pays property taxes on their principal place of residence in Indiana.
Additional Forms
Schedule 2, Schedule C
- Social Security and Railroad Retirement Benefits
Details
Indiana does not tax Social Security and railroad retirement benefits issued by the Railroad Retirement Board.
All Social Security benefits and/or railroad retirement benefits (issued by the Railroad Retirement Board) included in the income taxed on your federal income tax return should be deducted on your Indiana tax return.Who is eligible?
Anyone who received Social Security income and/or railroad retirement benefits that are issued by the U.S. Railroad Retirement Board and included in federal adjusted gross income.
Additional Forms
Schedule 2, Schedule C
- Unemployment Compensation Deduction
Details
Indiana may tax a smaller amount of unemployment compensation than what is being taxed on your federal income tax return. Make sure to enclose your 1099G to claim the deduction.
Who is eligible?
Anyone who reported unemployment compensation on the federal income tax return may be eligible.
Additional Forms
Schedule 2, Schedule C
More Articles
Do you like to gamble? If so, then you should know that the taxman beats the odds every time you do. The Internal Revenue Service and many states consider any money you win in the casino as taxable income. This applies to all types of casual gambling – from roulette and poker tournaments to slots, bingo and even fantasy football. In some cases, the casino will withhold a percentage of your winnings for taxes before it pays you at the rate of 24 percent.
Casino Winnings Are Not Tax-Free
Casino winnings count as gambling income and gambling income is always taxed at the federal level. That includes cash from slot machines, poker tournaments, baccarat, roulette, keno, bingo, raffles, lotteries and horse racing. If you win a non-cash prize like a car or a vacation, you pay taxes on the fair market value of the item you win.
By law, you must report all your winnings on your federal income tax return – and all means all. Whether you win five bucks on the slots or five million on the poker tables, you are technically required to report it. Job income plus gambling income plus other income equals the total income on your tax return. Subtract the deductions, and you'll pay taxes on the resulting figure at your standard income tax rate.
How Much You Win Matters
While you're required to report every last dollar of winnings, the casino will only get involved when your winnings hit certain thresholds for income reporting:
- $5,000 (reduced by the wager or buy-in) from a poker tournament, sweepstakes, jai alai, lotteries and wagering pools.
- $1,500 (reduced by the wager) in keno winnings.
- $1,200 (not reduced by the wager) from slot machines or bingo
- $600 (reduced by the wager at the casino's discretion) for all other types of winnings but only if the payout is at least 300 times your wager.
Win at or above these amounts, and the casino will send you IRS Form W2-G to report the full amount won and the amount of tax withholding if any. You will need this form to prepare your tax return.
Understand that you must report all gambling winnings to the IRS, not just those listed above. It just means that you don't have to fill out Form W2-G for other winnings. Income from table games, such as craps, roulette, blackjack and baccarat, do not require a WG-2, for example, regardless of the amount won. It's not clear why the IRS has differentiated it this way, but those are the rules. However, you still have to report the income from these games.
What is the Federal Gambling Tax Rate?
Standard federal tax withholding applies to winnings of $5,000 or more from:
- Wagering pools (this does not include poker tournaments).
- Lotteries.
- Sweepstakes.
- Other gambling transactions where the winnings are at least 300 times the amount wagered.
If you win above the threshold from these types of games, the casino automatically withholds 24 percent of your winnings for the IRS before it pays you. If you cannot provide a Social Security number, the casino will make a 'backup withholding.' A backup withholding is also applied at the rate of 24 percent, only now it includes all your gambling winnings from slot machines, keno, bingo, poker tournaments and more. This money gets passed directly to the IRS and credited against your final tax bill. Before December 31, 2017, the standard withholding rate was 25 percent and the backup rate was 28 percent.
The $5,000 threshold applies to net winnings, meaning you deduct the amount of your wager or buy-in. For example, if you won $5,500 on the poker tables but had to buy in to the game for $1,000, then you would not be subject to the minimum withholding threshold.
It's important to understand that withholding is an entirely separate requirement from reporting the winning on Form WG-2. Just because your gambling winning is reported on Form WG-2 does not automatically require a withholding for federal income taxes.
Indiana Tax On Gambling Winnings
Can You Deduct Gambling Losses?
If you itemize your deductions on Schedule A, then you can also deduct gambling losses but only up to the amount of the winnings shown on your tax return. So, if you won $5,000 on the blackjack table, you could only deduct $5,000 worth of losing bets, not the $6,000 you actually lost on gambling wagers during the tax year. And you cannot carry your losses from year to year.
The IRS recommends that you keep a gambling log or spreadsheet showing all your wins and losses. The log should contain the date of the gambling activity, type of activity, name and address of the casino, amount of winnings and losses, and the names of other people there with you as part of the wagering pool. Be sure to keep all tickets, receipts and statements if you're going to claim gambling losses as the IRS may call for evidence in support of your claim.
What About State Withholding Tax on Gambling Winnings?
There are good states for gamblers and bad states for gamblers. If you're going to 'lose the shirt off your back,' you might as well do it in a 'good' gambling state like Nevada, which has no state tax on gambling winnings. The 'bad' states tax your gambling winnings either as a flat percentage of the amount won or by ramping up the percentage owed depending on how much you won.
Each state has different rules. In Maryland, for example, you must report winnings between $500 and $5,000 within 60 days and pay state income taxes within that time frame; you report winnings under $500 on your annual state tax return and winnings over $5,000 are subject to withholding by the casino due to state taxes. Personal tax rates begin at 2 percent and increase to a maximum of 5.75 percent in 2018. In Iowa, there's an automatic 5 percent withholding for state income tax purposes whenever federal taxes are withheld.
State taxes are due in the state you won the income and different rules may apply to players from out of state. The casino should be clued in on the state's withholding laws. Speak to them if you're not clear why the payout is less than you expect.
How to Report Taxes on Casino Winnings
You should receive all of your W2-Gs by January 31 and you'll need these forms to complete your federal and state tax returns. Boxes 1, 4 and 15 are the most important as these show your taxable gambling winnings, federal income taxes withheld and state income taxes withheld, respectively.
You must report the amount specified in Box 1, as well as other gambling income not reported on a W2-G, on the 'other income' line of your IRS Form 1040. This form is being replaced with a simpler form for the 2019 tax season but the reporting requirement remains the same. If your winnings are subject to withholding, you should report the amount in the 'payment' section of your return.
Different rules apply to professional gamblers who gamble full time to earn a livelihood. As a pro gambler, your winnings will be subject to self-employment tax after offsetting gambling losses and after other allowable expenses.