In Massachusetts, gambling can be defined as winning $5 or more by placing a bet "or gaming on sides or hands of those gaming." The state does permit some forms of gambling, but not all until sports gambling launches in 2023. For instance, there are legal casinos in Massachusetts, lottery, as well as horse and dog tracks. When winning on these games, those within the state will be expected to pay a gambling tax in Massachusetts.
To add to this, sports betting in Massachusetts has been legalized. This means that a Massachusetts gambling tax will be put into place. All gamblers should factor in any tax obligations that may come with the gambling wins with MA sportsbooks, as well as on casino and lottery wins. We’re going to answer some specific Massachusetts gambling tax questions, as well as some questions on federal taxes.
Massachusetts taxes ordinary income at 5%. This means there is not a set gambling tax rate in MA. It will be treated differently than your income, but the rate will depend on your overall taxable income. You should keep any documentation you receive - especially pertaining to a loss. You can declare gambling losses on state taxes and possibly federal U.S. taxes
You will be required to pay taxes on gambling winnings with Massachusetts sports betting apps, sites and retail sportsbooks. This includes federal and state taxes. Reporting gambling winnings is the responsibility of every Massachusetts resident, however small the wins. If you win under $5000, there is no withholding, but it's still potentially subject to taxes.
If you win above $5000, the casino or sportsbook must withhold 24% and is obligated to issue you Form W-2G, which will document their withholdings. If you’re lucky enough to win greater than $5000, you will have to provide the casino with your SSN or Tax ID number, plus two forms of ID, and they will issue you the Form.
Massachusetts taxes gambling income at 5%, the same rate they tax all ordinary income. It's a tax on your total gambling winnings, not on any particular win. And it's important to note that this is on top of Federal taxes on gambling winnings. Those are classified as “other” income but effectively taxed at the same rate as the taxes on your “regular” income.
A Massachusetts taxpayer can claim and report gambling wins for taxes in Massachusetts by filling out Schedule X on the state income tax form. Specifically, you fill out Line 3, “Other gambling winnings (sources other than Massachusetts state lottery)”. Once you have the amount, you also add it to Line 9 on your state of Massachusetts tax return.
You are also responsible for federal taxes on gambling winnings in Massachusetts. To do that, fill out Schedule 1 for “Additional Income and Adjustments to Income”. Enter your gambling income on Line 8b. You can also enter any deductions associated with gambling income including gambling losses up to the amount of your gambling winnings.
Every Massachusetts taxpayer must report non-cash gambling winnings as well. It is treated as Massachusetts gross income equal to the fair market value of the win. Taking down that $100,000 Ferrari is great but it comes with outstanding tax liabilities. The gambling establishment will provide you with form 1099-MISC. If they don’t, you are responsible to fill one out yourself.
Every gaming establishment is obligated to issue you a Form w-2G if you win $5000 or greater. If for some reason you don’t get the form, contact the casino as they should have a copy. If that fails for some reason, contact the IRS itself as they too should have a copy. Not having the form does not relieve you of the income tax liability, so just report the company using the above process.
Yes, you can deduct gambling losses in Massachusetts on both your Federal and State tax returns. But state and federal rules only let you deduct up to the number of your gambling winnings. So in other words you can’t use gambling losses to offset federal gross income. They can only offset gambling income.
Lottery winnings are taxable in Massachusetts in a similar manner to how casino and sports betting winnings are taxed. On the Federal level, lottery wins are taxed at the same rate as regular income and are entered on Schedule 1 as you do with gambling win. As for the state, winnings are entered on Line 8b and are also taxed at the same 5% rate as on regular income.
So what happens when everyone in the office goes pool a bunch of lottery tickets and one of them hits big enough to incur taxes? If this happens, one person in the group is designated the “winner” and must fill out Form 5754 and submit it to the casino. There the designated “winner” submits the tax ID’s and prize shares of each member of the group. Everyone will then receive and file Form w-2G.
After all that, you submit your taxes as you would if it was an individual lottery win, and pay at the regular Federal and State of Massachusetts rates.
Out-of-state lottery winnings count towards federal gross income. They are still entered on Schedule 1 on your federal taxes. On your state taxes, it goes into your Massachusetts gross income on Line 8b on your return.
The tax rates are the same as rates on ordinary federal gross income whether the gambling winnings were from in-state or out. For in-state, that’s 5% and for federal taxes, that’s just whatever your effective rate is on that marginal income.
It's important to state that any Massachusetts resident receiving gambling winnings should report it, same as you would report all taxable income. This holds true even if this includes a non-cash prize. Not only is this in your financial interest, but it can prevent you from unnecessary fines and fees. The gaming establishment has already withheld some of your winnings, so reporting it properly sets you up for a refund or effective credit vs other gross income. You don't want to be paying taxes that you have already taken care of.
If you don’t report, you may get hit with higher withholding levels on the Federal level. Federal withholding rules stipulate that the rate may go up from 24-25% to 28%.
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