Charles Trautman, EA · Since 1969
Every win is income. Losses only help if you itemize.
Since sports betting became legal in Colorado in 2020, we’ve seen more surprise tax bills from gambling than ever. The rules haven’t changed much, but the 2025 tax law made one big change for 2026: you can now deduct only 90% of your losses. A year when you break even can leave you owing tax.
For 2025 and 2026 returns. Current as of October 11, 2026.
All of it: casino winnings, sportsbook and betting app payouts, lottery and scratch tickets, poker, horse racing, fantasy sports, raffles, office pools, and the fair market value of non-cash prizes like a car or a trip. Whether or not you get a form, it belongs on your return.
Winnings go on Schedule 1 as other income. You can’t simply report your net result for the year. Losses are a separate itemized deduction.
Sportsbook apps issue a W-2G only on large, long-odds wins, but they keep a complete history. Download the year-end win/loss statement; it’s the best record you have.
If gambling is genuinely your business, you report on Schedule C. Your losses and expenses are still limited to your winnings, and for 2026 the 90% limit applies to both.
For 2026, the reporting thresholds rose to $2,000 for most games, and will rise with inflation after that. A W-2G also goes to the IRS.
| Type of game | 2025: W-2G if winnings are | 2026: W-2G if winnings are |
|---|---|---|
| Slot machines, bingo | $1,200 or more | $2,000 or more |
| Keno | $1,500 or more, net of the wager | $2,000 or more |
| Poker tournaments | More than $5,000, net of the buy-in | More than $5,000 |
| Sports betting, horse racing, lottery, table games and other wagers | $600 or more and at least 300 times the wager | $2,000 or more and at least 300 times the wager |
Federal tax of 24% is withheld from most winnings over $5,000 (for wagers, when the payout is also at least 300 times the bet), and from any reportable win if you don’t give your Social Security number. Withholding is a down payment; the real tax depends on your bracket.
When federal tax is withheld from winnings, Colorado generally requires the payer to withhold 4% for Colorado too. The Department of Revenue updated its withholding rules in 2026. The amount is credited on your Colorado return.
Gambling losses are deductible only as an itemized deduction, and only up to your winnings. Starting with 2026, only 90% of your losses count.
Win $20,000, lose $20,000: if you itemize, you deduct $20,000 and owe tax on nothing.
Same year in 2026: you deduct 90% of $20,000, or $18,000, and owe tax on $2,000 even though you broke even.
Most people take the standard deduction. Then losses don’t help at all, and every dollar of winnings is taxed. Winning $8,000 and losing $10,000 can still mean tax on $8,000.
A bill to restore the full deduction, back to January 1, 2026, cleared the House Ways and Means Committee in September. It isn’t law yet. (See Still pending.)
The IRS expects you to prove your losses. A shoebox of losing lottery tickets found in the parking lot won’t do.
Date, place, type of game, amount wagered, and amount won or lost, written down as you go.
Player’s club win/loss statements and sportsbook account histories. They help, but the IRS treats them as supporting evidence, not proof on their own.
ATM withdrawals at casinos, deposits to betting apps, and the W-2Gs and Forms 5754 you received.
For slot machines, the IRS has proposed letting players net wins and losses within a single session, generally one day at one casino, instead of counting every spin.
Colorado starts from federal taxable income, so winnings are taxed at 4.4% and itemized losses carry through, under the same 90% limit for 2026. Colorado withholding shows up as a credit. Nonresidents who win in Colorado, at a casino in Black Hawk or Cripple Creek, for example, owe Colorado tax on those winnings. If you live here and win in Las Vegas, Nevada has no income tax, but Colorado taxes it.
Yes. The W-2G thresholds only decide whether the casino or app sends a form. All gambling winnings are taxable.
No. Losses can only offset winnings, never other income. And for 2026, only 90% of your losses count. If you take the standard deduction, losses don’t help at all.
No. Each year stands on its own. There’s no carryforward for gambling losses.
They issue Form W-2G for large wins at long odds, which also goes to the IRS. They don’t send a form for smaller wins, but those are still taxable, and the app keeps a full record of your account.
Yes. On a joint return, winnings are joint income. Your spouse’s losses can offset your spouse’s winnings, and the higher AGI can affect credits and Social Security taxation for both of you.
Bring your W-2Gs and your casino and sportsbook win/loss statements. We’ll make sure the losses you can deduct get deducted. Taxes can be tough, but the Tax Shop has your back.