Horse racing winnings tax in Arizona
Arizona taxes horse racing winnings as ordinary income at a flat 2.5%.
On an $8,000 horse racing win, $2,120 is withheld at payout. The tax comes to $1,310 ($1,110 federal and $200 Arizona), and you get $810 back when you file, so you keep $6,690. That's for a single filer with $60,000 of other income and no gambling losses.
Updated · 2026 tax rules · How we calculate
You keep
$6,690
Cash at payout
$5,880
Total tax
$1,310
Over-withheld
$810
- Form W-2G
- Yes
- Federal withholding at payout
- $1,920
- Federal tax on the winnings
- $1,110
- State tax
- $200
- Arizona withholding at payout
- $200
- Over-withheld
- $810
- You keep
- $6,690
$8,000 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.
Arizona taxes gambling winnings as ordinary income.
Arizona requires the payer to hold back 2.5% for state tax.
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.
$8,000 minus $1,310 in federal and state tax: an effective rate of 16.4%.
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.
The rules
- Arizona tax
- Arizona taxes horse racing winnings as ordinary income at a flat 2.5%.[1]Unverified
- Federal tax form
- Horse racing (pari-mutuel) winnings are reported on a W-2G when they are $2,000 or more (after subtracting the wager) and at least 300 times the wager. The threshold was $600 before 2026.[2]
- Federal withholding
- 24% is withheld from pari-mutuel winnings of more than $5,000, but only when the win is also at least 300 times the wager.[2]
- Arizona withholding
- Arizona withholds 2.5% whenever federal tax is withheld.[5]
- Gambling losses
- You can deduct losses only as an Arizona itemized deduction, up to your winnings. Arizona lets you itemize even if you took the federal standard deduction, and its itemized deductions follow the federal rules as of January 1, 2026, so the 90% limit applies.[6] How the federal 90% loss rule works
- Visitors
- Arizona taxes nonresidents on horse racing winnings won there, so visitors may need to file a nonresident return.[9]Unverified
What you keep at different amounts
For a single filer with $60,000 of other income and no gambling losses, living and winning in Arizona.
| Won | W-2G | Withheld | Federal tax | State tax | You keep |
|---|---|---|---|---|---|
| $1,500 | No | $0 | $180 | $38 | $1,283 |
| $2,000 | Yes | $0 | $240 | $50 | $1,710 |
| $8,000 | Yes | $2,120 | $1,110 | $200 | $6,690 |
| $10,000 | Yes | $2,650 | $1,550 | $250 | $8,200 |
| $100,000 | Yes | $26,500 | $22,114 | $2,500 | $75,386 |
Assumes a $2 bet amount, so the 300x test is met at every amount shown.
Records to keep for horse racing winnings
Pari-mutuel winnings are your payout minus the bet. A W-2G and withholding both need the win to be at least 300 times the bet, which exotic bets like trifectas often clear.
Losses only count if you can prove them. For horse racing winnings, the IRS suggests keeping:[10]
- The races you bet on and the amount of each wager
- What you collected on winning tickets and lost on losing tickets
- Unredeemed tickets and payment records from the track
All of this goes alongside the diary the IRS expects for every kind of gambling: keeping gambling records the IRS will accept.
Questions
- How much is Arizona tax on horse racing winnings?
- Arizona taxes horse racing winnings as ordinary income at a flat 2.5%.[1]Unverified
- Does Arizona withhold tax from horse racing winnings?
- Arizona withholds 2.5% whenever federal tax is withheld.[5]
- Do visitors pay Arizona tax on horse racing winnings?
- Arizona taxes nonresidents on horse racing winnings won there, so visitors may need to file a nonresident return.[9]Unverified
More for Arizona
All of Arizona's gambling tax rules · Horse racing in every state
Sources
- [1] Tax Foundation, State Individual Income Tax Rates and Brackets, 2026 · checked September 22, 2026
- [2] IRS, Instructions for Forms W-2G and 5754 (01/2026) · checked September 22, 2026
- [3] Federal Register, REG-113229-25 proposed rule (Apr. 17, 2026) · checked September 22, 2026
- [4] 26 U.S. Code § 3402 (withholding) · checked September 22, 2026
- [5] A.R.S. 43-405 Extension of withholding to gambling winnings · checked September 22, 2026
- [6] A.R.S. § 43-1042, Itemized deductions · checked October 2, 2026
- [7] A.R.S. § 43-105, Internal revenue code; definition; application · checked October 2, 2026
- [8] Arizona DOR, 2025 Form 140 Instructions · checked October 2, 2026
- [9] ADOR Private Taxpayer Ruling LR99-012 (1999) · checked September 22, 2026
- [10] IRS, Publication 529, Miscellaneous Deductions · checked September 28, 2026