To calculate the amount you need to pay in Kentucky, enter your annual income and gambling winnings details into our gambling and lottery tax calculator; the tool will do the rest for you. Simple!
The Kentucky gambling tax rate is a flat 6% of the proceeds paid (winnings minus stake) in 2023, and gambling winnings are subject to federal taxes.
Additionally, because gambling winnings are classed as ordinary income, which is added to your working income, the amount of federal tax you pay will increase if your gambling winnings lift your total income into the next tax bracket.
Below are federal tax rates for a SINGLE person in the U.S.:
Gambling opportunities in Kentucky are set to expand greatly in September, when Kentucky sports betting opens at retail racetrack locations on September, 7, 2023. Kentucky sportsbook apps will follow with a launch date of September 28, 2023. So it's about to be even more important to understand Kentucky's specific tax laws for anyone that makes money from gambling.
As of right now, Kentucky sports betting options are limited to pool wagering on horse races and harness racing, but state authorities still require anyone betting at horse racing tracks to pay tax on winnings.
In this article, we'll detail exactly what the gambling tax laws are in Kentucky, what bettors need to do to stay within the rules as well as answering all the important questions around gambling tax laws in Kentucky.
Our handy Kentucky gambling tax calculator is designed to make your life easy if you are not sure how much tax you need to pay on winnings. All gambling income considered taxable by the IRS must be reported on both federal and Kentucky income tax returns.
The threshold rate which invokes payment of Kentucky gambling winning taxes varies depending on the type of wager. For the majority of pool wagering and lottery games, the threshold is $5,000.
Once your winnings go over that amount, your operator will withhold 6% of your winnings to cover state taxes. But that's not all: IRS rules state that a fixed rate of 24% of all winnings must also be paid in federal taxes.
Yes, gambling winnings are classed as ordinary income and are therefore taxable in Kentucky.
When calculating Kentucky gambling tax, you are allowed to deduct losses, although they cannot exceed the amount of the winnings.
Gambling winnings are required to be reported to the IRS on Form W-2G when you win at least $1,200 from bingo or slot machines, $1,500 or more from keno, more than $5,000 from pool bet or lottery win, and $600 or more from other types of gambles when the payout is at least 300 times the amount of the wager.
Any win that breaches these thresholds will be subject to a 6% Kentucky income tax payment, therefore you will be required to pay taxes on gambling winnings that exceeds this threshold with Kentucky sports betting apps, retail sportsbooks, and Kentucky lottery winnings.
March 31, 2023 was a milestone day in the history of Kentucky sports betting laws. It was the day that the Kentucky Gov. Andy Beshear signed sports betting bill HB 551 into law. Kentucky became the 37th U.S. state to legalize sports betting.
The Kentucky Horse Racing Committee (KHRC), which regulates sports betting in the state, recently confirmed Kentucky sportsbooks launch date as September 7, 2023, at retail racetrack locations. Kentucky sportsbook apps can go live three weeks later on September 28, 2023.
In 2022, a bill to legalize sports betting in Kentucky passed through the house but failed in the Senate. So, almost five years since the federal ban on sports wagering was struck down, Kentucky was finally able to pass a bill to legalize online betting.
All betting operators are required to issue a Form W-2 G, Certain Gambling Winnings, to anyone that wins an amount that breaches the following thresholds:
$1,200 from bingo or slot machines, $1,500 or more from keno, anything over $5,000 from a poker tournament, wagering pool or lottery game, and anything above $600 from other types of gambles when the payout is at least 300 times the amount of the stake, which covers lottery-style games.
This form provides all the relevant details, including amount of winnings and the amount withheld by the operator for tax purposes.
A copy of this form is also sent to IRS so they know if you have got lucky on the lottery or indeed, if you are a regular winner on the horses.
Form W-2G is your friend here because it does the hard work for you. You should be sent one of these forms if you have landed a big payout and the form must be kept and included with when filing tax returns.
Gambling losses must also be recorded in itemized format on Form 104o, Schedule A. Remember, the maximum amount of losses that can be deducted is the amount you have won.
If you are not sent a W-2G form by your operator, you can either contact them to request one or keep a record of the all the transaction details so that they can be tallied on your tax return.
Here are the Kentucky gambling tax thresholds, over which tax must be paid:
If you believe your winnings have gone over the Kentucky gambling tax threshold and have not been sent a W-2G form by your operator, then you can either contact them to request one, or download one from IRS via this link - https://www.irs.gov/forms-pubs/about-form-w-2-g.
Don't be fooled into thinking that because your operator hasn't sent you a W-2G form then the IRS won't know about your winnings - that is not the case. All amounts above the thresholds are reported to IRS and those winnings are considered taxable income.
The best way to ensure you stay on top of gambling taxes in Kentucky is to keep updated records of ALL gambling transactions.
Forgetting to report gambling losses could prove a costly error, depending on the amount of your winnings.
The IRS expect you to keep original copies of payment slips, receipts, tickets and W-2G forms so if you don't submit your gambling losses, you will simply end up paying a greater amount in tax on your winnings.
You are allowed to deduct gambling losses in order to lower the amount of tax you pay on gambling winnings.
However, the loss deductions cannot exceed the amount you have won in the first place.
Losses must be reported in itemized format on a Schedule A (Form 1040), which can be downloaded here: https://www.irs.gov/forms-pubs/about-schedule-a-form-1040.
Ultimately, most people lose money gambling, especially on when it comes to high low-probability games like the state lottery.
If you are losing money gambling, then you won't be liable to pay federal taxation as your ordinary income will not increase above the income gained from work.
State tax laws dictate that 6% is withheld from gambling winnings that exceed the respective threshold but, if you this will be refunded upon receipt of poof of losses when you file your tax returns.
Losses cannot exceed winnings, so you cannot get into a situation where you are able to pay less tax than you would if you did not gamble at all.
Kentucky gambling winning taxes are important to understand for KY lottery players because winnings can be huge.
Anyone that wins over $5,000 on any top of lottery game in Kentucky will forego 6% of the proceeds (winnings minus amount of the bet) to Kentucky authorities as taxation.
Lottery operators in Kentucky will issue a W-2G form to the winner detailing all information, including stake, winnings and total amount of tax paid.
You will need to keep the W-2G form for your records because IRS laws dictate that you will have to pay a further 24% in federal tax on those winnings.
If you are the person in charge of placing lottery wagers for a syndicate in Kentucky, then you will not want to pay tax on the total lottery winnings, should you win big.
The designated syndicate leader will beed to fill in Form 5754 as well as providing photo ID, Social Security numbers and signatures of all other syndicate members.
The syndicate leader is named primary leader, then W-2G forms are sent to all other syndicate members, from which federal and state taxes will be deducted.
Rules for multi-state lottery winnings vary across the US but any North Carolina resident that wins on a multi-state game such as Powerball or MegaMillions will be subject to the same tax regulations as they would playing the Kentucky state lottery.
That means that any substantial win, whether it be a lump sum or a regular monthly/yearly payments, means that 25% will be withheld for federal tax purposes while your will also be required to pay 6% in state taxes.
Even though there are some states that don't tax lottery winnings, any resident of Kentucky that wins $600 or more in a state lottery game will be required to pay the statutory 6% to Kentucky state authorities as well as a fixed 24% rate in federal taxes.
Failure to report gambling winnings could prove a serious and expensive business. If the amount you owe is not paid in full, the IRS is likely to apply interest on the outstanding money as well as penalty fees.
Remember, if you are sent a W-2G form by your Kentucky betting operator, then the IRS will also be sent that form so they will know how much you have won.
The IRS will not be informed by the operator if you don't hit the thresholds in an individual wager but they will not look favorably at anyone not declaring gambling winnings in their annual tax returns.
Ultimately, the onus is on the individual to ensure that they keep up-to-date records of all gambling transactions. Failure to do so could cause all sorts of problems down the line, including surprise bills and penalty fines.
Gambling losses need to itemized in order to properly file your tax return, but the total of gambling losses cannot exceed the amount you won in the first place. Once you hit that threshold, you are done calculating your gambling losses.
Taxes for gambling winnings in Kentucky are calculated by keeping records of all gambling winnings by the individual, which means keeping copies of all W-2G forms. You will be able to deduct losses up to the amount you have won, but the net difference will be regarded as ordinary income that is taxable by both state and IRS.
If the lottery games like Powerball and MegaMillions are your bag, then lottery winnings of up to $5,000 are yours to keep tax free. Anything above that and you will need to fill in a W-2G. That limit also applies to horse racing bettors betting into racecourse pools on track and sweepstake players.
You can prove gambling losses on your KY taxes by storing all records in a safe place and ensure that everything you do gambling wise is recorded and documented. If you keep all your receipts and tickets, then itemizing gambling losses in Kentucky is pretty straightforward.
Kentucky state law requires all gambling operators to withhold the amount of 6% of any winnings that exceed the above thresholds. This is normally done automatically by the operator, who will then issue a W-2G form to the bettor that confirms all details of the transaction.
Yes and no. Gambling losses are tax deductible against any winnings, up to the amount you have won, but gambling losses are not tax deductible as a single entity - you cannot use gambling losses to bring down your overall personal tax bill.
Gavin Beech is a writer and contributor for BetKentucky.com and has worked in the betting industry for almost 20 years. Gavin is an experienced horse racing journalist, sports betting content writer and tipster. He has worked for some of the biggest online operators around, notably MailOnline and the Racing Post, where he is a regular on the Live Tipster slot.
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