Withholding vs. tax owed on gambling winnings

When a payer withholds, it sends 24% of the win to the IRS for you. That's a flat rate. Your actual tax depends on your bracket, which runs from 10% to 37% and counts the winnings on top of your other income.

So withholding is almost never exactly right. Lower earners get some back; higher earners owe more when they file.

Regular withholding applies to wins of more than $5,000 from lotteries and wagering pools, and from sports bets and races that pay at least 300 times the stake.

Slots, keno, bingo and poker tournaments have no regular withholding, however big the win. The whole tax on a slot jackpot is due when you file.

Federal tax only, single filer, no state tax:

Other income	Withheld	Federal tax on the prize	Balance at filing
$20,000	$12,000	$6,180	-$5,820
$60,000	$12,000	$10,350	-$1,650
$150,000	$12,000	$12,000	$0
$400,000	$12,000	$17,500	$5,500
$900,000	$12,000	$18,500	$6,500

A negative balance means withholding covered more than the prize added to your tax, which offsets tax on the rest of your income. Above roughly $100,000 of income, every dollar of a prize is taxed at more than the 24% withheld.

A large unwithheld win can leave you underpaid for the year. There's no penalty if your withholding and estimated payments cover the smaller of 90% of this year's tax or 100% of last year's (110% if last year's AGI was over $150,000), or if you owe less than $1,000.

Withholding counts as if it were paid evenly through the year, so a win in December can be covered by raising withholding from your paycheck for the rest of the year. Otherwise, make an estimated payment for the quarter you won.

Some states make the payer withhold state tax too, at their own rate and threshold; others don't. Either way, state tax is still owed when you file. Each state page lists its rule.