It is a myth that gambling winnings are tax-free. In the United States, all gambling winnings are taxable income, and New York adds its own state income tax on top of the federal bill. Whether you play at a regulated New York sportsbook or an offshore casino, the IRS and New York State expect their share.
Federal tax on gambling winnings
Winnings are reported as "other income" on your federal return. For certain wins, the payer issues a Form W-2G and may withhold tax up front:
| Trigger for a W-2G | Threshold |
|---|---|
| Slot machine or bingo win | $1,200+ |
| Keno win | $1,500+ (net) |
| Poker tournament win | $5,000+ (net) |
| Other wagers (incl. sports) | $600+ and 300x the wager |
Federal backup/withholding on reportable winnings is generally 24%. Even if no W-2G is issued and nothing is withheld — which is typical of offshore play — you are still legally required to report the income.
New York State tax on winnings
New York taxes gambling winnings as ordinary income at the state's graduated income-tax rates, which range from 4% up to 10.9% for the highest earners. Residents of New York City also owe city income tax on top of that. New York is also known for being strict on gambling-loss deductions at the state level, so you may owe state tax on gross winnings even in a losing year overall.
Can I deduct losses?
On your federal return, you can deduct gambling losses up to the amount of your winnings — but only if you itemize deductions, and you must keep good records. At the New York State level, loss deductibility is more limited, which can leave high-volume players owing state tax that feels disproportionate to their net result. This is a key reason to keep meticulous records.
Reporting offshore winnings
Offshore sites do not issue W-2Gs and do not withhold US tax. That does not make the money tax-free — the reporting obligation falls entirely on you. Keep a log of deposits, withdrawals, session results and crypto transactions. If you cash out crypto, be aware there may also be capital-gains considerations on the crypto itself, separate from the gambling income.
Record-keeping checklist
- Dates and types of wagers
- Amounts won and lost per session
- Names/URLs of the sites or venues
- W-2G and 1099 forms received
- Bank, card and crypto transaction records