New Jersey Gambling Taxes
You will need to pay taxes on your gambling winnings in New Jersey. The Garden State will levy a graduated income tax on any gambling profits you earn each year, and you must also pay federal income tax.
This guide explains how New Jersey gambling taxes work. We will explain how to declare gambling winnings when filing your tax return. You will also learn how to reduce or eliminate your tax liabilities by deducting any gambling losses from your winnings.
How to pay federal taxes on gambling in New Jersey
The IRS treats gambling winnings as taxable income. That applies to any profits earned from casinos, sweepstakes casino taxes, sportsbooks, poker, lotteries, horse races, and raffles.
Your winnings will be added to any other income that you earned over the course of the year, including your salary, bonuses, capital gains, and so on. You will then need to pay federal tax on the overall sum.
The rate you pay will depend on how much you earn and your marital status. Here are the brackets for the 2024 tax year:
| Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 10% | $0 – $11,600 | $0 – $23,200 | $0 – $11,600 | $0 – $16,550 |
| 12% | $11,600 – $47,150 | $23,200 – $94,300 | $11,600 – $47,150 | $16,550 – $63,100 |
| 22% | $47,150 – $100,525 | $94,300 – $201,050 | $47,150 – $100,525 | $63,100 – $100,500 |
| 24% | $100,525 – $191,950 | $201,050 – $383,900 | $100,525 – $191,950 | $100,500 – $191,950 |
| 32% | $191,950 – $243,725 | $383,900 – $487,450 | $191,950 – $243,725 | $191,950 – $243,700 |
| 35% | $243,725 – $609,350 | $487,450 – $731,200 | $231,251 – $365,600 | $243,700 – $609,350 |
| 37% | $609,350+ | $731,200+ | $365,600+ | $609,350+ |
If you win a substantial sum of money, the casino or sportsbook will withhold a 24% withholding tax. For example, if you win $10,000, the payer will keep back $2,400.
These are the current thresholds for withholding tax:
- $1,200 or more (not reduced by your bet amount) from slot machines or bingo
- $1,500 or more (reduced by your wager amount) from keno
- $5,000 or more (reduced by the wager or buy-in) from a poker tournament
- $5,000 or more from lotteries, sweepstakes, or betting pools
- $600 or more from other types of gambling if the amount is at least 300 times the wager
The 24% withholding tax is simply an estimate of how much you will owe. You may get some or all of it back after you file your tax return. Alternatively, you may end up owing more.
The payer is also supposed to issue you with a Form W-2G when you meet the thresholds listed above. A copy of the form will be sent to the IRS too. You can include the various forms you receive throughout the year when filing your IRS return.
How to declare your gambling winnings
Just follow these steps to declare your gambling winnings when filing your IRS return:
- Locate line 21, Form 1040. On Schedule 1, you will find an “Other Income” section.
- Enter the details of your gambling winnings over the course of the year. You can also make a note of any withholding tax that you paid on those winnings.
- Attach any Form W-2G documents that you may have received to the return. The IRS will then have a clear record of any withholding tax you have paid.
- If you intend to deduct any gambling losses from your winnings, head to line 27, Schedule A (Form 1040).
- You will need to carefully itemize your wins and losses throughout the year and attach details of any statements or tickets that back up those claims.
Our FAQ section provides detailed information about how to deduct gambling losses from your winnings.
How to pay state taxes on NJ gambling winnings
New Jersey levies a graduated income tax that ranges from 1.4% to 10.75%. Your gambling profits will be added to any additional income you earned that year, and you will then pay tax according to the bracket you end up in.
These are the 2023/24 income tax brackets for single people and married people filing separately:
| Income Tax Bracket | Tax Rate |
|---|---|
| Up to $20,000 | 1.40% |
| $20,001 to $35,000 | 1.75% minus $70 |
| $35,001 to $40,000 | 3.5% minus $682.50 |
| $40,001 to $75,000 | 5.525% minus $1,492.50 |
| $75,001 to $500,000 | 6.37% minus $2,126.25 |
| $500,001 to $1,000,000 | 8.97% minus $15,126.25 |
| $1,000,001 | 10.75% minus $32,926.25 |
These are the rates for married couples filing jointly and heads of household:
| Income Tax Bracket | Tax Rate |
|---|---|
| Up to $20,000 | 1.40% |
| $20,001 to $50,000 | 1.75% minus $70 |
| $50,001 to $70,000 | 2.45% minus $420 |
| $70,001 to $80,000 | 3.5% minus $1,154.50 |
| $80,001 to $150,000 | 5.525% minus $2,775 |
| $150,001 to $500,000 | 6.37% minus $4,042.50 |
| $500,000 to $1,000,000 | 8.97% minus $17,042.50 |
| $1,000,001 | 10.75% minus $34,842.50 |
Casinos, sportsbooks, and other payers are supposed to take a 3% withholding tax on gambling winnings in New Jersey.
How to file in New Jersey
- Scroll down to line 24 of Form NJ-1040, which reads: “Net gambling winnings.” You can enter details of any gambling profits earned from casinos, sportsbooks, racetracks, lottery winnings above $10,000, or bingo games.
- New Jersey allows you to deduct any gambling losses from your winnings. That is why the section is called “net gambling winnings” as opposed to “gross gambling winnings.”
- If you have not earned a profit from gambling activities, make no entry on line 24. If you are deducting losses from your winnings, you may need to substantiate those losses in a statement.
- For example, you can attach casino win/loss statements, a daily journal of wins and losses, losing tickets, and canceled checks. For more information, check out Technical Bulletin TB-20(R).
- If you have paid withholding tax on New Jersey gambling winnings, go down to line 55 of Form NJ-1040, “Total NJ Income Tax Withheld.” You can declare any tax that was withheld and enclose forms W-2 and 1099 as proof. You may get some of the withholding tax back, or you might need to pay extra.
Are lottery winnings taxable?
Yes, lottery winnings are taxable in New Jersey. You will need to pay federal income tax on your winnings, and the rate will be determined by your tax bracket.
For many years, lottery winnings were exempt from state income tax in New Jersey. However, that all changed in January 2009 when NJ gambling law was amended. Since then, winnings in excess of $10,000 have been subject to state income tax.
If you provide a valid Taxpayer Identification Number when claiming your prize, the lottery will take a 5% withholding tax on payouts of $10,001 to $500,000 and an 8% withholding tax on payouts of more than $500,000.
A standard withholding tax of 8% will be taken on all prizes of $10,000 or more if you do not provide a valid Taxpayer Identification Number.
Your NJ lottery winnings will then be added to the other income you earned that year, and you will pay state income tax according to the bracket you land in.
What if I win a lottery prize as part of a group?
You will still need to pay tax if you win a lottery prize as part of a group. Fill out Form 5754, which will allow the lottery to provide each member of the group with an accurate Form W-2G. A withholding tax will be taken if you win $5,000 or more.
When filing your federal and state income tax returns, you will need to declare the amount you won, as it is deemed taxable income.
NJ gambling tax FAQ
Yes, you can deduct any losses from your gambling winnings when filing your IRS return and your state income tax return in New Jersey. That means you only need to pay tax if you earn an overall profit from all gambling activities in a given year.
However, you will need to substantiate any gambling losses used to offset your winnings. Here are some examples of the evidence you might provide:
- A daily log or journal of wins and losses.
- Bank statements, card statements, or e-wallet statements.
- Betting history at your online casino or sportsbook.
- Losing lottery tickets or pari-mutuel wagering tickets.
Gambling losses can only be deducted from gambling winnings for tax purposes. For example, if you win $2,000 and lose $3,000, you will not pay any tax. However, you cannot deduct the remaining $1,000 from any other income earned that year, such as your salary or bonuses.
If you don’t receive a Form W-2G or you lose it, you can contact the online casino and ask for a replacement. Alternatively, contact the IRS and ask for a copy of the Form W-2G, as the IRS will automatically be sent a copy of each Form W-2G you receive.
Any significant wins you earn will automatically be reported to the government, as the payer will send the IRS a Form W-2G. You will also leave a digital trail when depositing and withdrawing funds at online casinos, poker rooms, and sportsbooks.
There is also the risk that you will be audited if your lifestyle clearly exceeds the income that you report when filing your return. For example, if you report annual income of $50,000, but you live in a mansion and drive a sports car, you may end up getting audited, leading to an investigation into your gambling.
The New Jersey Division of Taxation will charge interest for every month your tax remains unpaid. The rate is calculated as the prime rate plus 3%. For example, if the prime rate is 4%, you will be charged 7% interest.
New Jersey may also charge a 5% late payment penalty, plus a referral cost recovery fee for delinquent tax returns and a cost of collection fee if a certificate of debt is issued.
The IRS will charge interest on overdue federal income tax at 3% higher than the federal short-term interest rate. If the short-term rate is 4.75%, you will be charged 7.75%. An extra 0.5% monthly failure to pay penalty may also be imposed.
If you are significantly overdue and cannot pay your taxes, the IRS can seize your car or your home, so it is always best to pay in a timely manner if possible.
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