Arizona Gambling Winnings Tax Calculator

By Kevin Spain

Arizona has seen a steady growth in gambling over the years. Legalized horse racing began in 1940. In 1980, it became the first state west of the Mississippi River to implement a state lottery. In 1992, the first casinos opened. Now the state has sports betting, which was legalized in 2021, with land-based and online options available.

Bettors have a responsibility to report their winnings on their income tax return. With new bettors in Arizona, this important to emphasize. Gambling winnings in AZ are considered income and must be reported on state and federal tax returns even if you do not receive a W-2G, according to the IRS. It doesn't matter if it is a winning sports bet, lottery winnings or slots at Arizona casinos. Failure to do so can result in penalties for Arizona taxpayers, so it's crucial to keep accurate records of your gambling activity and consult a tax professional if you have any questions.

Your tax rate depends on your filing status, annual income and tax bracket. It's important to consider all of your AZ gambling winnings when preparing your taxes because those winnings, when added to your annual income, could move you into a higher tax bracket.

Marginal tax rate is the bracket your income falls into. The effective tax rate is the actual percentage you pay after taking the standard deduction and other possible deductions. The state income tax rate in Arizona ranges from 2.59% to 4.50%, which is the rate your gambling winnings are taxed.

Are Gambling Winnings Taxable In Arizona

All online gambling winnings, whether placed online or in person at casinos, are taxable. That includes winnings from sports betting, slot machines, pari-mutuel wagering, poker and the Arizona Lottery. Your winnings are taxable income even if they were added to your online account balance and never withdrawn. If your winnings exceed a certain threshold, usually $5,000, federal and state taxes might be automatically withheld.

In those instances, a W-2G form will be mailed to you and the IRS by the sports betting operator or casino where you enjoyed that gambling win. Even if no tax was withheld and you did not receive a W2-G form, it is still your responsibility to report all gambling income on your federal income tax return and state tax return, according to the IRS.

What Are The Arizona Gambling Tax Rates?

Gambling winnings are subject to a 24% federal tax rate. Arizona state tax ranges from 2.59% to 4.50%. The higher your taxable income, the higher your state tax rate. A breakdown of Arizona tax rates:

RateSingleMarried
2.59%$0 - $26,500$0 - $53,000
3.34%$26,501 - $53,000$53,001 - $106,000
4.17%$53,001 - $159,000$106,001 - $318,000
4.50%$159,001 and over$318,001 and over

How to Claim and Report Arizona Gambling Winnings For Taxes

It's important for you to know the thresholds that require income reporting by the sportsbook operator. Winnings in the following amounts must be reported by your Arizona betting site, casino or race track to the IRS:

  • $600 or more at a horse track, fantasy football or other sports pool (if that is 300 times your bet)
  • $1,200 or more at a slot machine or bingo game
  • $1,500 or more in keno winnings (minus the amount you bet)
  • $5,000 or more in poker tournament winnings (minus the amount you bet or buy-in price)

All of these require giving the payer your Social Security number, as well as filling out IRS Form W2-G to report the full amount won. In most cases, the casino will take 24% off your winnings for IRS federal gambling taxes before paying you.

If your winnings were non-cash prizes, such as a cruise or another trip or an automobile, the fair market value of the prize should be reported.

What to Do If You Don't Receive a Form W-2G In Arizona

Operators don't have to provide you with Form W-2G or withhold taxable amounts if your winnings don't meet a certain threshold. Regardless, all gambling winnings are considered taxable income and must be reported to the government even if you didn't receive a tax form from a casino or Arizona sportsbook.

If you don't have a tax form supplied by a gaming operator, make sure to keep meticulous records on your wins, losses, dates and gaming facilities. One benefit of online betting is that gaming operators typically keep an electronic record of your betting history that you can access for tax purposes directly from your account. You'll then report your winnings as "other income" on your state and federal tax returns.

Can I Deduct My Gambling Losses On My Taxes

Yes, but only as an itemized deduction. That means foregoing the standard deduction that most people take. Itemizing deductions can be complicated and consulting a tax professional is always a good idea if you have any questions. This also applies only to casual gamblers, as opposed to professionals who are considered self-employed and pay an estimated tax each quarter.

Additionally, the number of losses you deduct can't be more than the amount of gambling income you report, according to the IRS. Gambling losses claimed up to the number of winnings are classified as "other itemized deductions" on your Schedule A Form 1040. And remember to have all your documentation — provide as much information as possible.

Arizona Lottery Taxes

You won the Arizona Lottery. Congrats! Just like other gambling winnings, lottery prizes are taxable income. In Arizona, the Lottery is required by law to withhold 24% for federal taxes and 4.8% for state income taxes for United States citizens or resident aliens. For non-resident aliens, the current withholding tax is 30% federal and 6% state. Winners may also be liable for additional or fewer taxes when reported to the IRS.

How Are Group Lottery Wins Taxed In Arizona

If a lottery prize is won by a group of people, the tax liability is shared by all those involved unless the amount of the prize is less than $600. Each member of the winning group will have to report their winnings, which might be withheld automatically depending on the amount. Each person should get a Form W-2G.

Taxes on Multistate Lottery Wins

Taxes on multistate lotteries such as Powerball and Mega Millions are more complicated. Arizona is one of two states that tax the winnings of multistate lottery winners who live outside those states. The current withholding tax is 30% federal and 6% state.

If I Don't Report My AZ Gambling Winnings, What Happens?

If the IRS flags you, then it's probable you'll be subject to a financial penalty, likely a percentage of the tax you haven't paid on top of the taxes owed. If you won enough to receive a Form W-2G from a gaming facility, the IRS already has a record of your activity and knows you owe taxes on your winnings unless they were withheld automatically.

For smaller amounts that don't merit automatic withholding or the generation of a W-2G, the decision to report winnings as taxable income is a personal one. Even so, remember that both the state and the IRS state that Arizona taxpayers are legally required to report all gambling income.

Contributors

Kevin Spain

Reviewer since May 2021

Kevin Spain is an editor and writer for BetArizona.com. Previously, Kevin was a Senior Editor with USA Today, Online Sports Editor with The Times-Picayune and content editor with The Athletic.

Interests: Sports betting, Betting legislation, Online casinos