Alabama gambling winnings tax calculator
Alabama taxes gambling winnings as ordinary income at graduated rates from 2% to 5%.
Updated · 2026 tax rules · How we calculate
You keep
$7,950
Cash at payout
$7,600
Total tax
$2,050
Over-withheld
$350
- Form W-2G
- Yes
- Federal withholding at payout
- $2,400
- Federal tax on the winnings
- $1,550
- State tax
- $500
- Over-withheld
- $350
- You keep
- $7,950
$10,000 is at or above the $2,000 reporting threshold, so the payer files a W-2G with the IRS and gives you a copy.
The payer holds back 24% of winnings over $5,000 and sends it to the IRS. It's a prepayment, not the final tax.
Winnings are ordinary income stacked on your other $60,000. Your top dollar lands in the 22% bracket.
Alabama taxes gambling winnings as ordinary income.
More was withheld than these winnings add to your tax. The difference reduces what you owe on the rest of your return, or comes back as a refund.
$10,000 minus $2,050 in federal and state tax: an effective rate of 20.5%.
An estimate for 2026, not tax advice. It treats this win as your only gambling income for the year and leaves out local income taxes. Nothing you enter leaves your browser.
How Alabama taxes gambling winnings
- State income tax
- Alabama taxes gambling winnings as ordinary income at graduated rates from 2% to 5%.[1]
- Gambling losses
- You can deduct losses only as an Alabama itemized deduction (Schedule A, line 25), up to the gambling winnings you report.[2]Unverified
- Withholding
- We found no Alabama requirement to withhold state tax from gambling winnings, so any Alabama tax is due when you file.[3]Unverified
- Nonresidents
- Yes. Nonresidents report Alabama-source gambling winnings on Form 40NR. In-state sources are limited to tribal and electronic bingo and dog tracks.[4]
- Tax paid to other states
- Yes. Schedule CR gives a credit for tax paid to another state on the same gambling income, up to the Alabama tax on that income.[5]
- Legal gambling
- Sports betting: not legal. State lottery: no. Casinos: yes. Online casino: not legal.[3]
Also worth knowing
- Alabama's credit rule works through a gambling example: if the other state allows only part of your losses, the credit covers only the gambling income both states taxed, and there is no credit when your Alabama net gambling income is zero.[5]
- In Redmond v. State (2003), Alabama allowed gambling losses only when documented and only against winnings actually reported; losses at a casino whose winnings weren't reported were disallowed.[6]
- To claim the credit for tax paid to a state that doesn't allow a return for gambling winnings (such as Mississippi), you can attach your W-2Gs instead of that state's return.[2]
Examples by game
For a single filer with $60,000 of other income and no gambling losses, living and winning in Alabama.
| Game | Won | Withheld | Federal tax | State tax | You keep |
|---|---|---|---|---|---|
| Sports betting | $10,000 | $2,400 | $1,550 | $500 | $7,950 |
| Casino and slots | $5,000 | $0 | $600 | $250 | $4,150 |
| Table games | $5,000 | $0 | $600 | $250 | $4,150 |
| Poker tournaments | $20,000 | $0 | $3,750 | $1,000 | $15,250 |
| Lottery | $50,000 | $12,000 | $10,350 | $2,500 | $37,150 |
| Daily fantasy sports | $5,000 | $0 | $600 | $250 | $4,150 |
| Horse racing | $8,000 | $1,920 | $1,110 | $400 | $6,490 |
Questions
- Does Alabama tax gambling winnings?
- Yes, at graduated rates from 2% to 5%.[1]
- Can you deduct gambling losses in Alabama?
- You can deduct losses only as an Alabama itemized deduction (Schedule A, line 25), up to the gambling winnings you report.[2]Unverified
- Does Alabama withhold tax from gambling winnings?
- We found no Alabama requirement to withhold state tax from gambling winnings, so any Alabama tax is due when you file.[3]Unverified
- Do nonresidents pay Alabama tax on gambling winnings?
- Yes. Nonresidents report Alabama-source gambling winnings on Form 40NR. In-state sources are limited to tribal and electronic bingo and dog tracks.[4]
Alabama by game
Sources
- [1] Tax Foundation, State Individual Income Tax Rates and Brackets, 2026 · checked September 22, 2026
- [2] Alabama 2025 Form 40 Booklet (Schedule A line 25 instructions) · checked September 22, 2026
- [3] AGA State of the States 2025 (legal status as of Dec. 31, 2024) · checked September 22, 2026
- [4] Alabama 2025 Form 40NR Booklet · checked September 22, 2026
- [5] Ala. Admin. Code r. 810-3-21-.01, Credit for Taxes Paid to Another State · checked September 22, 2026
- [6] Alabama Tax Tribunal, Redmond v. State (2003) · checked September 22, 2026