What are the Tax Implications of Online Gambling in New Jersey?
Online gambling in New Jersey is extremely popular and the Garden State has one of the biggest selections of online gambling websites in the US. In fact, New Jersey was one of the driving forces behind the changes in online gambling legislation in the United States and were one of the first to offer licensed and regulated online gambling.
The New Jersey Division of Gaming regulates online gambling in NJ and that includes sports betting, casino games, lottery, and poker. However, unlike many other countries around the world, some states in the US consider gambling activities a taxable income, and that includes New Jersey. What are the tax implications of online gambling in New Jersey?
Gambling Tax Thresholds
Every gambler in New Jersey must understand the tax implications of their betting winnings. There are two different types of tax which must be applied to online gambling income in New Jersey and we will come to those in more detail shortly. Before that, it is important to understand what the threshold is for paying gambling tax in New Jersey for the different forms of gambling.
We begin with sports betting, and that includes horse racing and greyhound racing. You must pay tax on sports betting winnings if it is at least $600 and your payout is at least 300x your bet amount. If you play online casino games, including slots, table games, live dealer games, and bingo, the tax threshold is $1,200 or more. This not only applies to gambling at online casinos but also land based casinos. When playing at poker websites in New Jersey, any winnings over $5,000 is taxable and for those playing keno, the tax threshold is set at $1,200. When working out the taxable amount for keno, the figure is the amount of the payout deducted by the wager.
When reporting online gambling winnings in New Jersey, the amount must be listed in Box 1 of the W-2G form. When gambling online, the W-2G form will be sent electronically from the online gambling company or via USPS. If you decide to play at sweepstake casinos using gold coins, there is nothing to worry about in terms of taxation because you cannot win real money. The games are played purely for fun. If that sounds like something you are interested in, check out the full list of sweepstakes casinos, all of which are available to play in the United States.
Federal Online Gambling Tax
All online gambling winnings are taxed as ordinary income at a federal level. So, all money that reaches the threshold from online gambling activity will be taxed the same as any other income, such as that from a job. The rates of the federal tax will depend on filing status and local income but can be as a high as 37% for those who are gambling big online and winning large sums of money. There will be estimated federal taxes to pay throughout the year for those who are making a living from gambling online.
New Jersey State Tax
State taxes are an additional online gambling tax to pay for people in New Jersey. The state tax for online gambling winnings in New Jersey is currently set at 3%. So, when paying tax on gambling profits in New Jersey, both a federal tax and state tax must be applied. For those in the highest earning bracket, that would be 37% and 3%.
When reporting gambling winnings for the year, losses from gambling can be deducted from the final figure. This will help to reduce the total amount being taxed but there is a maximum amount that can be deducted. The maximum amount that can be deducted is equal to the amount of winnings from online gambling for the year. It is important to keep all documentation when gambling online as it will be used to prove losses for taxation purposes. All receipts from every wager should be saved and a record kept of all online gambling activity.
The tax implications of online gambling in New Jersey may seem complex on the face of it but it soon becomes straightforward. Simply keeping a record of all online gambling activity each time you have completed a gambling session will make things a lot easier.