Gambling Winnings - Iowa Income Tax/Withholding

This information will help you understand the Iowa income tax responsibilities associated with your winnings from gambling activity in Iowa.

Why Didn’t I Receive All of My Winnings?

A portion of your winnings may have been withheld for taxes. Certain winnings are subject to withholding at a 5% rate for Iowa and 25% rate for federal income tax purposes.

The withholding of state income tax from your winnings may not necessarily satisfy your Iowa tax responsibilities. You may be required to file an Iowa income tax return. You may also owe more state income tax than what was withheld, depending on different variables such as your total Iowa income or your total income from all sources.

Why Are My Name and Social Security Number Required to Collect Winnings?

Payers of winnings from horse racing, dog racing, bingo games, and lotteries must report winnings of more than $600 to the Internal Revenue Service and the Iowa Department of Revenue by filing form W-2G. Winnings of $1,200 or more from slot machines are reported on form W-2G.

The winner's name and Social Security Number are required on the W-2G form.

What is Subject to Withholding?

Lottery Winnings

Any payment of winnings greater than $600 is subject to withholding. This also applies to winnings from a multi-state lottery if the tickets were purchased within the state of Iowa.

Prizes

from games of skill, games of chance, bingo or raffles

Any payment of a prize where the amount won exceeds $600 is subject to withholding.

Pari-mutuel Winnings

Race track winnings more than $1,000 are subject to withholding.

Slot Machines - River Boats & Racetracks

Withholding is required if winnings exceed $1,200 from slot machines.

What is Exempt from Withholding?

American Indian Casinos

Winnings at Iowa American Indian casinos are not subject to withholding.

Note: winnings at Indian casinos by individuals other than American Indians are subject to Iowa income tax even though they aren't subject to withholding..

Who Pays Iowa Income Tax on Winnings?

Residents and Part-year Residents of Iowa

Winnings are included as income when you file your Iowa income tax return.

Nonresidents

If you are a nonresident of Iowa, you are required to file an Iowa return if your Iowa-source income is $1,000 or more and your gross income (from all sources, not just Iowa) is at least $9,000 if single or $13,500 for married filers.

How are Winnings Reported?

Taxpayers report their gambling winnings on federal and Iowa income tax returns. Winnings are fully taxable and, within limits, gambling losses are deductible.

Report winnings on the "Other Income" line on the IA 1040. If federal tax is taken out of your winnings, you
may claim a deduction for it on the "federal income tax withheld" line on the IA 1040.

Anyone reporting either gambling winnings or losses cannot use the IA1040A short form.

Even if your Iowa-source income is less than the amount required to file a return, you may want to file an Iowa return if Iowa tax has been withheld from your winnings. You may be eligible for a refund of the tax withheld on your winnings. You cannot receive a refund unless you file a return.

Failure to file an Iowa individual income tax return, if required, may subject you to penalty and interest in addition to the tax owed.

Can Losses be Deducted?

Gambling losses can be deducted up to the amount of winnings. If you itemize, you may claim gambling losses as a miscellaneous deduction on Schedule A. However, this deduction cannot be more than your winnings.

For example, if your gambling winnings for the year are $1,000, your deduction for gambling losses cannot exceed $1,000.

Taxpayers who claim the standard deduction on the Iowa return cannot deduct their gambling losses, although they must still report gambling winnings.

Out-of-state Winnings

Iowa residents who have winnings from gambling in another state may have to file an income tax return with the other state and pay tax on the winnings.

These winnings are also taxable to Iowa. However, the Iowa resident may claim an out-of-state tax credit on the IA 130 of the IA 1040 for the tax paid to the other state.

Keeping Records

An accurate diary or similar record of gambling winnings and losses must be kept along with tickets, receipts, canceled checks, and other documentation. These supporting records do not need to be sent in with your tax return, but should be retained in case of an audit.

See federal Publication 529 for more information.

10/21/10