The casino did no automatic withholding on the winnings ($44k) my question is, what would be the best course of action. I am assuming they will issue a form at the beginning of next year that I will use to file taxes. This is in Illinois, so state taxes are 4.95% and I have been seeing federal is 24%.
My original plan was to keep $12k in a HYSA and use it next tax time for when I will inevitably owe taxes. But I also heard there could be some penalty of some kind for doing this?
Not sure what to do. Thanks.
Won a jackpot/drawing at local casino. Tax questions
byu/ntswart intax
Posted by ntswart
7 Comments
I’m not sure your bracket, but as long as you have 110% of your 2025 taxes paid in, you won’t be subject to penalties. So, if you’re a w-2 employee that normally gets a refund, and presumably got a raise. You’d likely be covered. So, yes, setting aside the tax funds in a secure investment is a good idea. Also, they will send you a W-2G next January. You should still clam the income regardless but also be diligent in tracking your gambling losses for the year in the event you itemize or end up with enough losses to itemize
If you will not meet the safe harbor criteria, you should make an estimated quarterly payment for your tax owed from this. If you meet the criteria, you can keep it in a HYSA and pay it in April.
You should pay any money you think you owe directly to the IRS and state to avoid underpayment penalties. If you post your filing status, dependents, other income, and if you take the standard vs itemized deductions I can guestimate your tax liability. One thing is if you itemize you can offset gambling winnings against losses if you have any.
First, be aware that all of your gambling wins are taxable, whether you receive a form from the casino or not. You must report all wins, and in 2026 can only deduct 90% of your losses (up to the amount of your wins) if you itemize. You are responsible for keeping accurate records. For certain types of gambling, like slots, using the session method can lower your tax liability, if your records are sufficient to support it.
Illinois doesn’t allow the deduction of *any* gambling losses, so you’ll be taxed on the full amount of your wins.
But yes, the easiest way to avoid an underpayment penalty is to meet the safe habor rule (pay at least 100% of your total tax liability from 2025 (row 24 of your 1040) if your AGI was $150K or less filing single/MFJ and $75K if MFS, otherwise it’s at least 110%).
Here are pitfalls I’ve seen in the past.
People forget that gambling losses may or may not be an itemized deduction. It’s not like I hit $44k, but I’ve lost $30k, so only $14k is taxable. It may be but not always.
Many states take income before standard or itemized deductions so in effect 100% of the “gross winnings” is state taxable.
if your marginal tax rates are 24% fed and 4.95% state, make estimated tax payments soon of $10,560 Fed and $2,178 state and you should be all set. that’ll cover the taxes themselves and there shouldn’t be any penalty.
the casino really should have issued you a W-2G on the spot. if you use tax software, the software will usually ask for some details from the form and not having it could mess up e-filing.
but casino policies do differ on when they issue them. i would at least try to find out how that casino supposedly does it, either by poking around its website or by asking the next time you’re in there.
The casino issued your 1099 at the time they issues your prize. That us what you use next year for your taxes. They will not reissue one in Jan/Feb. If you misplaced it call and ask for a reprint.