NJ Gambling Winnings Tax Calculator
New Jersey is a true Promised Lands to gamblers, offering a huge variety of betting sites, new online casinos in NJ, and even poker websites. What this means is that you can participate in all forms of gambling at your own discretion and not have to worry about anything at all.
Still, it pays to know how gambling winnings tax work in the Garden State! Today, we introduce you to a working NJ lottery tax calculator which will help inform you what tax you owe based on your winnings and losses.
Luckily for all of us, New Jersey makes the calculation of your gambling winnings and associated tax very easy. Let’s first find out more about the tax laws in the state.
Taxes on New Jersey Lottery Winnings
The first point we wish to cover is how online gambling is taxable income. For better or for worse, two types of tax apply to your lottery winnings. That is federal and state tax. This is standard procedure, but luckily for you, lottery winnings are charged at a much lower rate compared to online gambling products such as sportsbook and casino games.
So, any winnings that you generate through the lottery that exceed $10,000 have been taxable income since 2009. The amount is taxed under the state gross income tax. A taxpayer needs to use a Taxpayer Identification Number (TIN) which the IRS uses to verify tax obligations.
For amounts between $10,001 and $500,000, you are taxed 5% of your winnings. For any lottery winnings exceeding $500,000, as in $500,001, you owe 8% in state tax. Federal tax laws though will also take a hefty bite out of your lottery winnings with 24-25% going to the Internal Revenue Service.
New Jersey residents are subject to both types of tax that must be honored in full. The winnings must feature in tax reports lest it triggers enforcement action by the IRS. The good news is that lotteries are familiar with all procedures, making it easy for winners to follow through with the necessary process and report their winnings.
Sharing Lottery Winnings in New Jersey
You may be wondering – what happens if multiple people (at least two) win the lottery prize and must split the proceeds? Well, this is covered by state and federal laws, and what you need to do next is assume liability for your share of the winnings, simple as that.
So, if the prize money exceeds $10,000, the win is considered a taxable event. If one person wins less than $10,000 and the other exceeds this amount, they are all considered taxable income unfortunately. But what about federal taxes on online gambling in NJ and other operations? Well, let’s look at how the federal law works and what the infamous W2-G form is.
W2-G Form and NJ Gambling Winnings Tax
Alright, since you need to pay online gambling taxes NJ tries to make this process simple enough. To report the amounts (and owed amounts) to the IRS, you need to note down all your gambling winnings in the W2-G form.
The way this form works is mostly automated these days. An establishment, whether this is a casino, a sportsbook, a racetrack or an online casino or online sports betting NJ operator will send a copy to the IRS in certain cases. Depending on the activity you participate in, a copy of the W2-G form is sent under the following conditions:
- Horse Racing: If you have winnings of $600 or if your winnings exceed the amount wagered by 300x.
- Poker Tournaments: Any winnings that exceed $5,000 (the winnings are calculated by subtracting the buy-in amount).
- Slots Machines and Bingo: Winnings that exceed $1,200 will trigger taxable events. Note that the amount wagered does not subtract what constitutes a win.
- Keno: Winnings that exceed $1,500 minus the amount you have wagered to offset this.
In terms of state gambling tax and federal gambling tax on these activities in New Jersey, 3% is withheld by the state whereas 24% is withheld by the federal government. This makes it easier to follow through with tax laws and to know that you will trigger a taxable event in those circumstances. The 24% rate was fixed a few years ago, and is a new law, that makes it convenient to calculate NJ sports betting tax, online gambling due tax and more.
Reporting Your Gambling Winnings
As mentioned so far, you will need to report your gambling winnings on your W2-G form. There is no circumnavigating this and even if there was, the IRS is very good at tracking down errant taxpayers.
Obviously, when your winnings are just above the taxable event threshold, you may consider them to be a bit unfair and that is understandable. However, it’s of the utmost importance that you make sure to report everything in earnest.
NJ gambling tax is low, with just 3%. Pennsylvania, for example, charges 3.7% statewide. There is some good news too when it comes to how you can seek to offset your gambling tax. It’s intuitive and some gamblers may not even know they are eligible for such offsets. Let’s have a look.
Sports betting and casino winnings are subject to the same state and federal laws, so keep this in mind when you participate in these activities as well. They should all appear on your reporting of tax to the government.
Use Your Losses to Your Advantage
A loss may suck at the slot machines, but it is another matter when you are reporting your gambling winnings to the government. Essentially, you can deduct your gambling losses from your winnings. However, you cannot report more losses than winnings. The biggest amount of loss you may report may match the winnings you have generated – but no further.
The good news still is that you can use losses from across different regulated gambling markets and use them as deductibles. Let’s say you just won a big amount from slots just now. You can combine this with losses from poker sites in NJ, online sports betting, and other online casino NJ games and help yourself reduce the tax burden a little.
Should I File W2-G If the Gambling Property Already Did?
Yes, you should include your W2-G copy on your Form 1040 and note gambling income as Other Income, and then report it to the Internal Revenue Service. Unfortunately, the tax system in the United States expects all of us to be knowledgeable about our income and to report it accurately to the federal government.
Not filing a W2-G copy would result in a response from the government. Now, this is nothing to worry about at first. The IRS would only send you a letter reminder that you have underreported your income, most likely a Form CP2000. This form is standard procedure, and no penalties apply.
However, not complying with the required paperwork may have more severe consequences, so we urge you to always report your gambling winnings. While reporting your gambling income may seem a little complicated at first, all it takes is reading through the relevant forms and keeping your finances in order so that you can track them easily and make sure that all that you put down on your tax form is actually reported accurately to the government – no more, no less.
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