IOWA TAX AND YOUR WINNINGS

This information will help you understand the Iowa income tax withholding responsibilities associated with your winnings from wagers on the Lottery, games of skill, games of chance, bingos, raffles, race track wagers or excursion (river) boat gambling vessels if the gambling activity occurred in Iowa.

• Lottery winnings subject to withholding. Any payment of winnings greater than $600 is subject to withholding. This also applies to winnings from the Multi-state Lottery if the tickets were purchased within the State of Iowa.
• Prizes subject to withholding 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 subject to withholding. Race track winnings in excess of $1,000 are subject to withholding.
• Withholding from excursion boat gambling. Withholding is required if the winnings exceed $1,200 from slot machines on river boats.
• Withholding from slot machines at racetracks. Withholding is required if the winnings exceed $1,200 from slot machines at racetracks.
• Iowa Indian casino winnings are not subject to withholding. However, winnings by individuals other than Native Americans are taxable to Iowa.

Gambling Winnings
Gambling winnings are fully taxable and, within limits, gambling losses are deductible, according to the Internal Revenue Service.

Winnings from all types of gambling, including charitable gambling, casinos, bingo raffles, state lotteries, and dog and horse track betting, must be reported on the "Other Income" line on the front of form 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 front of form IA 1040.

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

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 need not be sent in with your tax return, but should be retained in case of an audit.

Who has to pay Iowa income taxes on their winnings?
Residents or part-year residents of Iowa must include winnings as income when you file your Iowa income tax return.

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.

Even if your Iowa source income is less than the amount required to file a return, you may wish 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.

Iowa residents with winnings from gambling outside Iowa
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 gambling winnings are also taxable to Iowa. However, the Iowa resident may claim an out-of-state tax credit on the IA130 of the Iowa long form return for the tax paid to the other state.

Can I subtract my losses from my winnings on my Iowa income tax return?
Not in all situations. First of all, you cannot claim a deduction for gambling losses that is greater than gambling winnings reported as "Other Income" on the IA1040. Gambling losses that qualify for deduction are reported as a miscellaneous deduction on Schedule A. Taxpayers who claim the standard deduction on the Iowa return cannot deduct their gambling losses, although they must still report gambling winnings.

See Federal Publication 529 for more information on gambling winnings and losses, including information on the necessity of keeping records needed to substantiate gambling losses.

Why did I have to give my name and Social Security Number to collect winnings?
Payers of gambling winnings from horse racing, dog racing and the State Lottery must report winnings of more than $600 to the Internal Revenue Service and the Iowa Department of Revenue by filing form W-2G. In the case of winnings from bingo games or slot machines, reporting on form W-2G is required if the winnings are $1,200 or more. The winner's name and Social Security Number is required on the W-2G form.

Why didn’t I receive all of my winnings?
A portion of your winnings may have been withheld for taxes. According to State and Federal laws, certain winnings are subject to withholding at a 5% rate for State income tax purposes and are subject to withholding at a 25% rate for Federal income tax purposes.

The withholding of State income tax from your winnings will not necessarily satisfy your Iowa tax responsibilities. You may be required to file an Iowa income tax return. You must file to get a refund of any Iowa income tax withheld. You may owe more State income tax, depending on different variables such as your total Iowa income or your total income from all sources.

Be aware that there are different dollar amount thresholds for withholding of State income tax and for withholding of Federal income tax.