PA Gambling Taxes Explained - What Taxes do I Pay on Winnings?

You will need to pay taxes on your gambling winnings in Pennsylvania. The Keystone State levies a flat 3.07% personal income tax, and you will also be required to pay federal income tax on any winnings earned.

This guide explains how to pay taxes on your PA gambling winnings. You will also learn how to deduct any losses from your gambling winnings, which can reduce or eliminate your tax liabilities.

How to pay federal taxes on PA gambling winnings

The IRS treats online casino winnings as taxable income. Your winnings will be added to all other income earned over the course of the year, such as your wages, capital gains, dividends, and so on.

You will then pay income tax according to the bracket you end up in. These are the bands 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+

*Please note: these thresholds function within a graduated system. So, if you were in one of the higher brackets, you would only pay that percentage on the part of your income that fits the bracket. So, a single person who makes $250,000 would only pay 35% on the earnings between $243,725 and $250,000, or the last $6,275 that he or she earned.

If you win a substantial amount, the payer (such as an online casino or sportsbook) is supposed to issue you with a Form W-2G. A copy of each Form W-2G you receive will also be sent directly to the IRS. These are the thresholds for receiving a Form W-2G:

$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

Those gambling winnings are subject to a 24% withholding tax. That means 24% of your winnings will be held back when you are paid out. However, that 24% is an estimated tax. You might get some of it back when you file your annual tax return, or you might end up owing more.

What to do when you file

Here’s how to file your gambling winnings on your IRS return:

When it is time to file your tax return, the full amount of your gambling winnings for the year must be reported on line 21, Form 1040. There is an “Other Income” section on Schedule 1, which covers any taxable income for which there is not a specific line identified on Form 1040.
Include your gambling winnings, along with any withholding tax that you already paid. As mentioned above, you may be reimbursed for all or some of that withholding tax, or you may owe more.
Attach any Form W-2G documents that you received to your return. That will highlight any federal income tax withheld over the course of the year.
If you wish to deduct any losses from your winnings, you can do so on line 27, Schedule A (Form 1040). To deduct your losses, you must provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses.

We discuss deductions in greater detail in our “Can I deduct gambling losses?” FAQ below. You can also check out IRS Publication 529, “Miscellaneous Deductions,” for more information on record keeping.

How to pay state taxes on PA gambling winnings

Pennsylvania imposes a 3.07% tax on all personal income, which includes any profits earned from gambling each year. This is the lowest rate of any state that levies a flat income tax.

You must report any gambling winnings on PA-40 Schedule T. Follow these steps:

Enter any winnings that have already been subject to federal income withholding tax in line 1, and any other gambling winnings in line 2. Enter your total winnings in line 3.
Provide details of any losses in line 4. That includes the cost of your bets, but not any related expenses, such as meals, travel to casinos, fees paid to handicappers, and so on.
Enter any lottery winnings, if applicable, in line 5.
You can then type in the total taxable income in line 6.
Enter any PA tax withheld from federal Forms W-2G in line 7.

If you end the year with an overall gambling profit, you will then need to pay the flat 3.07% tax rate. Remember that you must keep a careful, itemized record of all wins and losses throughout the year if you intend to deduct your losses.

How to pay local taxes on PA gambling winnings

Some municipalities in Pennsylvania levy local income taxes. This is known as Local Earned Income Tax, and the rate can range from 1% to 3.75% depending on where you live.

However, gambling winnings are treated as non-taxable income when filing your local earned income tax return. In that regard, gambling winnings hold a similar status to child support, old age benefits, unemployment compensation, dividends, interest, proceeds from life insurance policies, and various other non-taxable income streams.

Are lottery winnings taxable?

Yes, lottery winnings are taxable. The IRS considers net lottery winnings to be ordinary taxable income. You can subtract the cost of your ticket, and you will then owe federal income tax on the remainder.

Lottery winnings are also subject to the 3.07% flat state personal income tax in Pennsylvania, so you must declare them on PA-40 Schedule T.

Also note that sweepstakes casino taxes are mandated on sweeps casino winnings.

What if I win a lottery prize as part of a group?

You can fill in IRS Form 5754 if you win a lottery prize as part of a group. That will enable the payer (such as the Pennsylvania Lottery) to accurately prepare a Form W-2G for each winner.

The form will show the taxable winnings for each member of the group, and withholding tax will be deducted on winnings of $5,000 or more. You can then declare your winnings, enter the withholding tax paid, and attach the Form W-2G when you file your annual tax return.

PA gambling tax FAQ

Can I deduct gambling losses?

Yes, you can deduct gambling losses when filing your taxes. They must be itemized on line 27 of Schedule A, Form 1040.

That means you will only need to pay tax if you end the year in profit from all gambling activities. For example, if you win $2,000 and lose $2,500, you will not be liable to pay tax, as your losses will exceed your winnings.

You cannot deduct more than your winnings. Related expenses, such as travel to a casino and meals at the casino, cannot be deducted. If you plan to deduct losses, keep a detailed record of all bets place, focusing on:

The date of each wager, the type of bet, and where you placed the bet.
The amount won or lost.
Wagering tickets, credit or debit card records, e-wallet records, and so on.

This should be relatively straightforward if you use online casinos, sportsbooks, racebooks, and poker rooms, but it is more challenging if you bet in-person and use cash, so make sure you keep a careful record.

What if I don’t get a Form W-2G from a PA online casino (or lose mine)?

You can contact the PA online casino and ask for the W-2G Form to be reissued. Just get in touch with the customer service team via live chat or email. Alternatively, you can contact the IRS directly to ask for the form, as the IRS receives a copy of every W-2G Form issued.

How will the government even know I played?

Any big wins are automatically reported to the IRS via Form W-2G, so the government will know when you earn a substantial payout. That applies to bets placed online and in-person.

You also risk getting audited if your lifestyle does not match your reported income. For example, if you report a $50,000 annual salary and drive around in a custom Porsche, you are likely to end up on the government’s radar, and your gambling activities could be investigated.

What if I don’t pay?

If you don’t pay state income tax, the Pennsylvania Department of Revenue will file a lien, which means it will be listed as a priority creditor that must be paid before you can conduct any other financial transactions.

Meanwhile, the IRS may issue a “failure to pay penalty” if you don’t pay your taxes on time. You will be charged 0.5% of the unpaid taxes for each month that the tax remains unpaid. The maximum penalty is 25% of the unpaid tax.

You will also need to pay interest on overdue federal income taxes. The rate is determined by adding 3% to the federal short-term interest rate, so if the short-term rate is 5%, you will be charged 8% interest.

Eventually, you may receive a Notice of Intent to Levy, informing you that the IRS is prepared to seize your assets to cover the amount owed, which can include your home, car, or bank balance. You may also have your passport revoked if you rack up a “seriously delinquent tax debt.”

Resources used on this page

These are the resources that we used when compiling the information on this page:

Pennsylvania Gambling Taxes