Tennessee online gambling taxes

Online sports betting, daily fantasy sports, horse racing, and social casinos are all legal and regulated in the state of Tennessee. However, online casinos and online poker rooms are not.

Additionally, if you’ve won money from any form of legal gambling in Tennessee, it should come as a pleasant surprise that the state does not impose a state income tax on gambling winnings. So, while you owe federal taxes, there aren’t any additional state taxes on your gambling income.

Is the tax rate different for each type of gambling?

Since Tennessee does not have a state income tax, it doesn’t matter what type of gambling you win money from. However, federal taxes still apply, and if the amount of money you’ve won meets the federal reporting threshold, 24% of your winnings will be withheld at the time of payout.

When is 24% automatically withheld?

The 24% federal withholding rate is applied when you win money from playing at online sportsbooks, horse race betting sites, and sweepstakes casinos.

Here’s when federal withholding will apply:

• $600+ in horse racing (if it’s at least 300x your bet)
• Any amount from sports betting where IRS withholding is required
• Sweepstakes casino winnings (if the operator issues a W-2G form)

How does your income affect taxes in Tennessee?

For state taxes, your income level doesn’t change anything on gambling winnings because the state doesn’t charge a tax on them. However, your total income does affect how much you owe in federal taxes.

The Internal Revenue Service (IRS) treats gambling winnings as extra income, so it adds to whatever you already make in a year. If your gambling winnings push your yearly income higher, you might owe more than the usual 24% that’s taken out at payout.

How winnings change your taxes

Let’s say you make $50,000 a year from your job.

• If you win $10,000 from gambling, your total income for the year is now $60,000.
• This could move you into a higher tax level, meaning you might owe more in taxes than the basic 24% they took out when you got paid.
• If you win a really big amount, like a jackpot, you might have to pay the highest tax rate (37%).

Can you lower what you owe with gambling losses?

• Yes, but only if you list out your deductions instead of taking the basic tax deduction.
• You can only report gambling losses up to the amount you won; you can’t say you lost more money than you actually won.

Bottom line

• Tennessee doesn’t charge any state taxes on gambling winnings, no matter how much you make.
• Your total yearly income affects how much you owe in federal taxes, so big wins could mean a bigger tax bill.
• You can report gambling losses to lower your taxes, but only up to the amount you won, and only if you don’t use the basic tax deduction.

How to pay gambling taxes in Tennessee?

Since Tennessee doesn’t take state taxes on gambling winnings, you only need to worry about federal taxes. Here’s how to take care of them:

1. Check if taxes were already taken out

• If you won a big amount, the sweepstakes casino or sportsbook might have already taken out 24% for federal taxes.
• You’ll get a W-2G form from them if your winnings reach the IRS limit.
• Even if they didn’t take anything out, you still have to report all your winnings when you file taxes.

2. Report your winnings when you do your taxes

• When you fill out your tax return, write down your gambling winnings under “Other Income” on Form 1040.
• If you got a W-2G form, use that to report exactly how much you won and what was already taken out.
• Even if you didn’t get a W-2G, you must still report everything you won, no matter how small.

3. Pay taxes early if needed

• If you win a lot of money and taxes aren’t taken out, you might need to send in tax payments every few months instead of waiting until tax season.
• The IRS wants people to pay as they go if they expect to owe more than $1,000 in taxes by the end of the year.
• You can pay the IRS online or send a check by mail.

4. Subtract losses from winnings (if you qualify)

• If you write down deductions instead of using the basic tax deduction, you can subtract gambling losses from your winnings to lower what you owe.
• You can only subtract losses up to the amount you won; you can’t say you lost more money than you actually won.
• Keep records of betting slips, receipts, and bank statements in case the IRS asks for proof.

5. File and pay on time

• The deadline to do your taxes is April 15, unless you ask for more time to file.
• If you have to pay taxes, make sure to pay by the deadline to keep from paying extra fees.

Tax breakdown for players in Tennessee

Here’s a simple breakdown of how different gambling verticals are taxed in Tennessee:

Sports betting

• Federal tax: 24% if you win over $600 or 300x your bet.
• Tax form: You’ll get a W-2G form if you win over $600.

Sweepstakes casinos

• Federal tax: 24% on any money you win.
• Tax form: They won’t give you a W-2G form, so you’ll need to track your winnings and report them.
• Prizes you cash out are usually written on a 1099-MISC as ‘other income.’

Daily Fantasy Sports (DFS)

• Federal tax: 24% if winnings go over $600.
• Tax form: You might get a W-2G or 1099-MISC form depending on which site you use.

Horse race betting

• Federal tax: 24% if you win over $600 and 300x your bet.
• Tax form: You’ll get a W-2G form if you win over $600.

What happens if you don’t report gambling winnings in Tennessee?

If you don’t let the IRS know about your gambling wins, you might end up owing more money later. Here’s what could happen. The IRS might add extra fees or penalties to what you owe. Not reporting could make them suspicious, so they might come and check your records. 

In the worst cases, you could even get in trouble with the law. Even though Tennessee doesn’t charge a tax on gambling wins, you still have to tell the IRS about everything. It’s always best to write down your wins and losses so you don’t have problems later.

Gambling in Tennessee — what’s legal?

The Tennessee online gambling industry only started in 2020 and still has to mature.

Firstly, Tennessee online casinos aren’t legal (land-based casinos aren’t legal either). Residents must cross state lines if they wish to play their favorite games like online baccarat, online roulette, or online blackjack.

On the other hand, Tennessee gambling is legal in the form of online sports betting and social casinos. Both are regulated by the Tennessee Sports Wagering Advisory Council (SWAC). Furthermore, fantasy sports have been legal since 2016 and are regulated by the Tennessee Department of State.

It is important to know that the Tennessee gambling age is 21, but for the lottery and bingo, it’s only 18.

Online sports betting Legal since 2020

The Volunteer State was the first to legalize online sports betting in the US. The online gambling law was passed in 2019, allowing sports bettors to bet legally online for the first time on November 1st, 2020. Currently, there are 12 licensed operators, all of which can be found on SWAC’s website. 11 operators hold a license for daily fantasy sports, which the Tennessee Department of State regulates. 

• Access to top online sportsbooks
• Bet on the top sports
• Claim a generous welcome bonus

• Real money casinos still prohibited

Sweepstakes casinos The alternative to casino gambling

If you love casino games in Tennessee, your only option is sweepstakes casinos. These types are mainly tolerated because of the absence of gambling elements with real money and are community-based. 

When playing at a sweeps casino you purchase virtual coins to play, and from there, you have the chance to win big cash prizes. Upon sign-up, you will be rewarded with a generous welcome bonus, and you can play and hang out with your friends.

You can exchange sweepstake credits for cash if you win, with some awesome jackpots to look out for. Some popular sweeps casinos for Tennessee players with an overall great experience include; LuckyLand slots, Pulsz casino, and Chumba casino.

• Most popular slots available
• Daily contests

• Unable to play for real money

Online poker Playable through sweepstakes casinos

Tennessee is the home of famous poker players such as Chris Moneymaker and Stanley Weiss. But can you play poker legally in the Volunteer State?

Unfortunately, no, but you can play poker variations at sweeps casinos – there are plenty of big names like Zynga and Big Fish. With many sweeps casinos offering online poker, Fortune Coins is the one that impressed me the most, having a variety from Texas hold ‘em to Omaha.

• Many social casinos to play poker
• Plenty of poker variations to play

• Real money poker is not legal

Other forms of gambling in Tennessee

The Volunteer State is definitely one of the strictest states when it comes to gambling. We have already covered the main verticals, but what other games can you play? The lottery is the most popular and widespread, having been legal since 2002.

Tennesseans have always enjoyed a flutter and can do so legally with sports betting. This even includes daily fantasy sports, which have been legal since 2016, with some top names like FanDuel and DraftKings offering their services.

Horse racing has a long tradition in the US, but you will not find a race track in Tennessee. Nonetheless, you can wager on parimutuel races through licensed operators like DRF Bets.

Also, those trying their luck at the lottery can, but only in person at physical stores and with cash. It has been legal since 2002, with the first ticket sold in 2004.

Land-based gambling in Tennessee and near Tennessee

Is offline gambling legal in Tennessee? No, you will have to cross state lines when it comes to land-based locations such as casinos and race tracks.

I’ve compiled a table of the closest and best casinos nearby. Fortunately, Tennesseans in Memphis and Gatlinburg do not have to travel far to get the live thrill of table games and slots.

Additionally, some of these locations are operated by some of the biggest names in gambling, including Caesars. Let’s have a look:

Gambling regulators in Tennessee

Tennessee gambling laws are some of the strictest in the country, with the state favoring sports betting compared to casino games. The main regulator is the SWAC which vets all operators and enforces all the rules. You can verify on the SWAC website if the Tennessee gaming site you are playing on is legit or not.

The lottery is regulated by the Tennessee Education Lottery Corporation, which ensures that all lotteries follow strict fairness practices and that players must be over 18. The lottery is also exclusively offline, and the ticket is bought with cash. Also, a proportion of the revenue goes to charitable causes, which benefit the local community.

As daily fantasy sports are legal in Tennessee, it falls under the Department of State called Division of Charitable Solicitations, Fantasy Sports, and Gaming. The law requires operators to pass rigorous testing regarding financials and transparency.

FAQs

Sources

• https://www.tn.gov/swac/about/faqs.html
• https://www.bettennessee.com/gambling-winnings-tax
• https://answers.justia.com/question/2024/01/04/how-are-gambling-winnings-taxed-specific-995107
• https://taxfoundation.org/research/all/state/sports-betting-tax-revenue/