Iowa online gambling: a full guide

Written by Denise Mathey

Checked by Paul P.

The Iowa online gambling landscape is a bit of a mixed bag. On the one hand, the Hawkeye State legalized online sports betting in 2019; on the other, legal online casinos remain unavailable.

On this page, I tackle the issue head-on, showing you what’s legal, what’s taxable, and how to file and pay your Iowa online gambling taxes.

• Overview
• Tax rates
• Income tax rates
• Paying gambling taxes
• Tax gambling deductions
• Tax breakdown
• Undisclosed winnings
• What’s legal
• Iowa sports betting
• Iowa social casinos
• Iowa online poker
• Other gambling
• Offline casinos
• Safety
• FAQs

Iowa online gambling taxes

Online gambling is legal in the state of Iowa. This includes online sports betting, Daily Fantasy Sports (DFS), online horse racing betting, and sweepstakes casinos. 

Sadly, all bills to legalize online casinos and online poker platforms haven’t been successful, so online casinos and poker rooms are illegal in the Hawkeye State.

Aside from the 24% federal withholding tax rate for gambling winnings that exceed $5,000, Iowa withholds 5% of gambling winnings exceeding $600 for sports betting and Daily Fantasy Sports (DFS) or $1,000 for horse race betting.

The individual Iowa income tax rate is 3.8% as of January 1, 2025, which is lower than the 5.7% state income tax rate required in 2024. You must report all online gambling winnings, regardless of the amount. 

This means you should report all money won online, even if the amounts do not meet the state’s 5% threshold for withholding.

Is the tax rate different for each type of gambling?

No, the Iowa state income tax rate on gambling winnings is the same for all legal online gambling verticals. This includes sports betting, DFS, and horse race betting. As of January 1, 2025, all gambling winnings are taxed at the flat individual tax rate of 3.8%.

That said, Iowa state withholding does vary depending on the type of online gambling, as follows:

• Sports Betting & DFS: 5% state withholding applies to winnings over $600.
• Horse Race Betting: 5% state withholding applies to winnings over $1,000.
• Federal Withholding: A 24% federal tax applies only if winnings exceed $5,000.

Even if the online sportsbook does not withhold any tax at the time of payment, you are still responsible for declaring gambling winnings at the 3.8% Iowa individual income tax rate.

Here’s table showing what your final or total tax paid will look like, based on federal and state withholding rates:

How does your income affect taxes in Iowa?

Iowa has a flat state income tax rate of 3.8%, so this rate is fixed. Irrespective of whether you earn $10,000 for the year or $50,000 for the year, it is still taxed at the same rate of 3.8%.

For example:

• If you earn $10,000, your Iowa state tax would be:
• $10,000 × 3.8% = $380
• If you earn $50,000, your Iowa state tax would be:
• $50,000 × 3.8% = $1,900

However, you should know that this only applies to state income tax, and when it comes to federal income taxes, that system is based on a gradual tax rate. In other words, the more you earn, the higher the tax on your income will be.

How to pay gambling taxes in Iowa?

In order to maintain your gambling tax obligations in Iowa, you need to comply with both state and federal tax laws. Here’s a quick step-by-step guide to help you navigate the process:

1. Ensure the online gambling operator has your information

If you’re gambling online in Iowa, ensure that the gambling platform has your personal information. This includes your Social Security number (SSN) or Taxpayer Identification Number (TIN).

In the event that you win $600 or more from sports betting, DFS, or horse race betting, the sportsbook will declare these winnings to the IRS as well as the Iowa Department of Revenue. Likewise, if you win more than $5,000, the 24% federal tax withholding rate applies automatically.

Additionally, online operators must issue a W-2G form to the Internal Revenue Service (IRS) for gambling winnings. If you don’t provide the gaming operator with your SSN or TIN, a higher withholding rate may apply, which could result in a 28% federal backup withholding.

2. Check who pays the IRS

In Iowa, both the IRS and the Iowa Department of Revenue require tax withholding on gambling winnings if certain thresholds are met.

Federal withholding applies if your winnings exceed $5,000.

State withholding applies if you win $600 or more from sports betting or DFS, or if you win $1,000 or more from horse race betting.

3. Wait for your W-2G form

If your winnings meet the reporting thresholds, you’ll receive a W-2G form from the online sportsbook or sweepstakes casino. This form will detail how much money you won online, including the amount withheld for federal and state taxes.

4. File an Iowa state tax return

The W-2G form is used to report federal taxes. For Iowa state taxes, you’ll need to complete Form IA 1040, which is the Individual Income Tax Return used to report “Other Income.”

Can you deduct gambling losses in Iowa?

Yes, you can deduct gambling losses in Iowa, but only on the federal level. Also, there are certain conditions that you need to meet first like the fact that you can only deduct gambling losses up to the amount that you won. 

For example:

If you won $2,000 from sports betting this year but lost $3,000 throughout the year, you cannot deduct the entire $3,000. You can only deduct up to the $2,000 that you won. This means your taxable gambling income would be $0 instead of $2,000, and you cannot claim an extra $1,000 in losses.

Additionally, if you want to deduct gambling losses, you must file your taxes using itemized deductions. To itemize your gambling losses, you need to complete Schedule A on the IA Form 1040. If you opt for the standard deduction, you will not be able to claim gambling losses.

Something else you must be aware of is that the IRS requires proof of your gambling losses. You’ll need to keep records of your betting slips, receipts, and screenshots from online gambling sites.

For example:

• March 5: Lost $200 on DraftKings (screenshot saved).
• July 10: Won $500 on FanDuel (received W-2G form).
• October 2: Lost $300 betting on horse racing (ticket/bet slip saved).

How this works in real life

• You won: $3,500 from online sports betting (reported on a W-2G).
• You lost: $4,000 from other sports bets.

Scenario 1: You itemize deductions

• You report $3,500 in winnings on your federal tax return.
• You claim $3,500 in gambling losses on Schedule A, so you don’t pay federal tax on the winnings.
• You still pay 3.8% Iowa tax on the $3,500 (because Iowa does not allow gambling loss deductions).

Scenario 2: You take the standard deduction

• You must pay federal tax on the full $3,500 in winnings because you didn’t deduct losses.
• You still pay 3.8% Iowa tax on $3,500.

Tax breakdown for players in Iowa

Here’s a simple breakdown of gambling taxes for Iowa players across all legal online gambling verticals:

Online sports betting & daily fantasy sports (DFS)

• Federal tax: 24% if you win over $5,000.
• Iowa state tax: 3.8% flat tax on all gambling winnings.
• State withholding: 5% applies if you win over $600.
• W-2G form: You’ll receive a W-2G form if you win over $600.

Online horse race betting

• Federal tax: 24% if you win over $5,000.
• Iowa state tax: 3.8% flat tax on all gambling winnings.
• State withholding: 5% applies if you win over $1,000.
• W-2G form: You’ll receive a W-2G form if you win over $1,000.

Sweepstakes casinos 

• Federal tax: 24% if you win over $5,000.
• Iowa state tax: 3.8% flat tax on all gambling winnings.
• State withholding: 5% applies if you win over $600.
• W-2G form: You’ll receive a W-2G form if you win over $600.

What happens if you don’t report your winnings?

If you don’t report gambling winnings in the state of Iowa, you could face penalties, fines, and even interest on taxes owed. That said, you’ll need to make sure that your taxes are up to date in case the IRS or the Iowa Department of Revenue decides to do an audit.

Something else you should also note is that the government already knows about your winnings, especially if the gambling operator issued a W-2G Form. So even if no taxes are withheld, you are still responsible for reporting your winnings at both the federal and state levels. So, ensure that you keep good records and pay your taxes to avoid stress later.

Iowa online gambling sites by type

Iowa gambling laws fall within the remit of the Iowa Racing and Gaming Commission (IRGC). To make life simpler, think of sports betting, fantasy sports, landbased casinos and social casinos as completely separate when trying to understand Iowa online gambling.

Although regulated by the same entity, they all come with different licensing requirements and regulations.

The gambling age in Iowa also differs according to sector. We will be taking a deep dive into each area to help you choose the best Iowa online gambling sites for you.

Online sports betting Legal since 2019

The Hawkeye State is one of the newest arrivals to the world of online wagering, but it’s taken a surprisingly short time for Iowa online gambling to take flight, especially when it comes to sports betting.

Currently, there are 18 sportsbooks licensed by the IRGC, as well as two of the most well-known Daily Fantasy Sports operators. Here, we bring you our experts’ choice of those Iowa online gambling sites that ranked highest across the board. Our list of best sports betting sites in Iowa offers players ample sports and markets to bet on at good odds, together with fair and regular promotions.

• Reputable sportsbooks
• Social casinos accessible

• No real-money online casinos

Social casinos The alternative to online casinos in Iowa

We dive right into the question on every player’s mind. When will Iowa online gambling welcome online casinos? While no one can predict the future, we’ll say it to you as it is: as things stand right now, much like the case with Nevada gambling, there doesn’t seem to be any movement in the Hawkeye State to legalize online casino games. This is also the situation with Maryland and Mississippi online gambling. 

Where does this leave players who don’t want to visit a physical casino to have a go on the slots or on any other casino game? Social casinos like Pulsz and sweepstakes casinos like Fortune Coins offer a thrilling alternative, and are perfectly legal to enjoy in Iowa. This is mostly because they don’t require players to gamble real money to enjoy the games, which means that they are not considered online gambling sites in the eyes of the law.

While Iowa online casinos aren’t legal yet, check out our list of the top sweeps and social casinos in the state. They’ve all been rated the best for gameplay, interface, variety and overall experience. 

• Good variety of social casinos
• Most popular slots available

• Can’t play casino for real money

Online poker Available at social casinos

Poker is another area that sadly lags behind on the Iowa online gambling scene. Those who are familiar with the game are aware of the level of skill required to excel, which is why many Iowa players have protested the fact that poker is lumped together with online casino games that depend purely on chance. While poker can be enjoyed physically at any one of the 23 physical casinos present in the state, Iowa gambling laws have not green-lit the online version of the game.

But even here there is a happy loophole for poker players in terms of online gambling in Iowa. Plenty of social casinos, such as Global Poker and Gambino Slots, offer a range of poker games. In fact, this is exactly the same as the same situation on the Illinois online gambling scene. Our experts have checked out the most reputable social casino and sweepstakes sites and scored them according to the Time2play rating criteria.

Our experts take into account everything from game variety to ease of payouts, software options and more. To the right, you’ll find our overall winner for social poker games. 

• Good variety of poker games

• No real money poker

Other forms of gambling in Iowa

Residents in the Hawkeye State have always enjoyed wagering and gambling, even though up till recently they had to visit physical parlors to do this. Lotteries, bingo and charity-based raffles are three of the most popular forms of gambling Iowa, and remain a very strong industry to date. Moreover, the 2019 Iowa gambling laws that legalized sports betting also opened the door to other forms of online gambling, such as Daily Fantasy Sports. 

Horse racing

Iowa has had a strong horse-racing gambling tradition for the best part of four decades. Iowa gambling laws first made provision for betting on horse-racing in May 1983, when the Pari-Mutuel Wagering Act was passed. In essence, this made it legal for players to bet against other players on horse-racing events, as long as wagers were laid down at the licensed racetrack. Iowa in fact has one licensed racetrack called Prairie Meadows.

Daily fantasy sports

The 2019 sports betting bills also made provision to add daily fantasy sports to online gambling in Iowa. Like sports betting, the legal gambling age in Iowa for daily fantasy sports is 21. The state currently has licensed two or the biggest names in the sector, DraftKings and FanDuel. Both sites regularly organize big-money tournaments for the likes of the NFL, MLB, UFC and PGA, which are extremely popular with IA online gambling.

Iowa Lottery

1985 saw the first state-sanctioned lottery happening in Iowa, regulated by the Iowa Lottery Board. The game turned out to be very popular in the Hawkeye State, with an instant-scratch game following months after that same year and Powerball and multi-denominational tickets introduces in 1992. Today, the lottery is regulated by the Iowa Lottery Authority.

Bingo

Although Iowa gambling laws don’t make provision for playing bingo online and there are no specialist bingo halls, there are a number of Native American licensed land-based casinos offering a variety of bingo games. The most well-known one is probably the Meskwaki Bingo Casino Hotel, which is licensed by the Iowa Indian Gaming Casinos. Charitable organizations are, however, allowed to organize bingo games and competitions.

Offline gambling: casinos in Iowa

Gambling in Iowa is not limited to IA gambling sites – the offline casino site is thriving, with a total of 23 casino resorts and a riverboat casino available for those who enjoy IRL gambling.

Of these, three tribal casinos are licensed by the National Indian Gaming Commission, while the IRGC has granted licenses to 20 state casinos. This number includes the Ameristar 2, a riverboat casino. Waterside gambling was legalized in Iowa in 1991.

Iowa online gambling and safety

The Hawkeye State may not be the state with the most generous gambling laws for US online casinos, but Iowa online gambling laws nonetheless provide for a very sound licensing system that is the responsibility of the Iowa Racing and Gaming Commission.

The IRGC ensures all operators that are given the green light to operate have satisfied a number of rigorous requirements. Online gambling laws in Iowa require the commission to operate on the basis of transparency, with every single gambling entity that makes the cut for a license listed on the IRGC website. This includes physical gambling facilities, online sportsbooks, daily fantasy sports and horse-racing. If it’s not online, it’s not legit. 

FAQs