New York online gambling taxes

New York (NY) has legalized some forms of gambling, but not all. While online sportsbooks, retail casinos, Daily Fantasy Sports (DFS), the New York Lottery, and horse racing are regulated, online casinos, as it stands, are not.

As a consolation, New Yorkers are free to engage in sweepstakes casinos, offering casino-style games with the opportunity to redeem virtual currency for gift cards and cash prizes.

Aside from the 24% federal tax rate, New Yorkers are subject to one of the most exorbitant state taxes on gambling winnings. In fact, NY bettors are subject to an automatic state withholding rate of 8.82% if federal withholding is required.

The 8.82% NY state withholding applies if sports betting, wagering pools, and lottery winnings exceed $5,000, or if all other forms of gambling winnings go above $600 and are at least 300x your wager. 

If gambling winnings do not meet the federal thresholds, then NY players are still obligated to declare their winnings based on a gradual income tax rate, ranging from 4% to 10.90%.

Tax rates for different gambling types

NY does not tax different types of gambling winnings at different rates, no matter where your winnings came from. Sports betting, sweepstakes casinos, the NY Lottery, or horse racing winnings are all taxed as regular income in New York’s graduated income tax system.

Here’s a breakdown of NY state gambling taxes based on the automatic federal withholding rates and the state’s gradual income tax rate:

Important note: All types of gambling in NY are taxed as regular income and based on the standard 8.82% tax rate or the state’s gradual income tax rate. However, withholding rules differ based on whether you won money from sports betting, sweepstakes casinos, etc. 

Your final taxes owed depend on your total income, not just the money you won. Gambling winnings also move you into a higher tax bracket, as they raise your total income.

How does your income affect taxes in New York?

Since NY has nine tax brackets, ranging from 4% to 10.90%, your online gambling winnings are added to your overall total taxable income, which automatically determines your final tax rate too.

Below is a breakdown of how different income levels, including gambling winnings, impact your final state tax rate:

Does New York have local taxes?

If you’re gambling from New York City (NYC) or Yonkers, then you must also pay local or city tax. NYC players must disclose all winnings, even if they were not held back at the time of payout.

On the other hand, Yonkers players must pay Yonkers tax if they live in the city, while non-residents must comply with the non-resident tax if they win money there.

How to pay gambling taxes in New York?

Winning any money while within the borders of NY means you’ll need to declare it and also pay the taxes. Below is a step-by-step guide that will help you meet your obligations.

1. Find out if your winnings are automatically taxed

The state of NY will not automatically withhold taxes on your gambling winnings unless, of course, federal withholding applies.

• For example, if you win $5,000 or more at a sportsbook in NY, or if your winnings exceed 300 times your wager, then the sports betting platform will automatically withhold 24% for federal taxes. Consequently, the 24% federal withholding rate automatically triggers an 8.82% New York State tax withholding.
• If you win $5,000 or more in Jackpocket or through the NY Lottery App, the automatic 8.82% NY state tax is withheld.

2. Get your hands on the relevant NY tax forms

If federal and state taxes are withheld, the online betting establishment must issue the following forms:

• Form IT-2102-G — This form reflects any NY state taxes that were withheld from your online winnings.
• Form W-2G — The online operator will send you this form if your winnings trigger federal withholding. It will also help when reporting your state taxes.

Regardless of whether you’ve received the above-mentioned forms or not, you are still responsible for declaring and paying taxes on all applicable online gambling winnings. When in doubt, you should still go ahead and report all gambling winnings, as it is better to overreport than underreport.

3. Report your online gambling winnings on your NY State tax return

You’ll need to fill out the following sections on Form IT-201, which is New York’s income tax return form:

• Line 16 — This section requires you to fill in your total online gambling winnings. It should be the same amount that you reported on your IRS Form 1040.
• Line 72 — Take a look at Form IT-2102-G and calculate all state taxes that were withheld. Then, report the total figure on this line.
• Line 73 — If NYC taxes were automatically withheld, you’ll need to report it right here, on Line 73.
• Line 74 — If you won money online while playing in Yonkers, you must report local income taxes that were withheld here.
• Line 28 — you can indeed recoup gambling losses in New York. However, you can only claim or deduct losses if they are less than what you won, or, in other words, if you lost more than you won during the course of that year.
• You have to itemize your deductions on your federal tax forms first. So, after totaling your gambling losses for the year, enter the figure on Line 28 of Form 1040. Then, you’ll need to complete Form IT-196 and place your losses on Line 29 of your NY state tax forms.

4. Pay remaining taxes

Since online gambling winnings are added to your total taxable income, they can increase your overall tax bracket.

• If not enough taxes were initially withheld, you will have to pay the remaining amount by April 15th.
• If too much tax was withheld initially, you may be eligible for a refund when you file your tax return.

Withholding NY tax breakdown

Your total online gambling winnings are added to your annual income in NY, so this will determine how much tax you owe. Let’s take a look at withholding rules based on different gambling verticals in NY.

Sports betting

Federal tax applies to sports betting winnings if you receive over $5,000 or 300x your bet. For example, let’s say you win $6,000 in a parlay bet — aside from the 24% federal tax, an additional 8.82% NY state tax will be deducted before payout.

Horse race betting

Federal tax applies if you win over $1,000 or if the odds were 300 to 1 or more. For example, if you win $1,500 in a parlay bet with 500x odds, the racetrack will automatically withhold the 24% federal tax plus the 8.82% NY state tax.

Daily fantasy sports

If your DFS winnings exceed IRS thresholds, then you are liable for tax on DFS winnings. For example, if you win $1,500 in a DraftKings DFS contest, but no federal taxes were withheld, you must still declare and pay the full amount when filing NY state taxes.

Online lottery

If your NY Lottery winnings go over $5,000, you are liable for a 24% federal tax withholding as well as an 8.82% state withholding tax amount. Winnings must be reported on Form IT-201.

Sweepstakes casinos

Federal taxes are applied to winnings if they exceed the IRS thresholds. If you redeem Sweeps Coins for cash prizes, it’s taxed as gambling winnings. Even if you redeem Sweeps Coins for gift cards or a physical prize, you still need to consider it taxable income.

• If you redeem Sweeps Coins worth $2,000 in cash prizes, it’s taxed as regular income in New York, which is between 4% and 10.90% based on your total income.
• If you redeem Sweeps Coins for a $1,000 gift card, it’s taxable as well and adds $1,000 to your total taxable income.
• If you win a laptop worth $1,500, it must still be reported as taxable income on your NY tax forms, meaning that the value of the laptop would add $1,500 to your total taxable income.

What happens if you don’t report winnings in NY?

Failing to declare and pay taxes on gambling winnings in New York could lead to consequences such as fines and penalties. What’s more, while the chances of an IRS audit are slim, it can happen. If it does, and you owe taxes on gambling winnings, it may very well lead to severe consequences.

So, when in doubt, it’s better to overreport than to underreport. Ultimately, ensure that you keep track of all gambling winnings and losses and comply with federal, state, and local tax rules.

Is online gambling legal in New York?

Right, so what’s legal online gambling in New York, and what isn’t? Sports betting is definitely the big one in NY. New York does have casino and poker gaming available, but only in the social gambling format.

That’s technically ‘fake money betting’, but you can buy virtual currency and win cash prizes from games, so social and sweepstakes spots functionally act as ‘mini online casinos.’

From the other forms of gambling, there’s plenty of offline stuff, including many physical casinos in the wider NYS area. The lottery and New York DFS make up the other big verticals. The gambling age in New York is 18 in most cases, but anything online is 21+.

Online sports betting in NY Legal since 2021

Sports wagering was technically signed into law by Governor Cuomo in 2021, but NY didn’t get it till 2022.

How does New York fare for sports betting? Pretty good on the whole; the best New York online gambling sites fall well within the upper-average parameters, except in one area. Most sites still don’t have enough options to bet on, we usually expect around 15 in the Empire State.

That said, there are many different leagues and markets within the sports available, which is a plus.

• Plenty of top operators
• Lots of markets and leagues for mainstream sports
• Matches established states in almost all areas

• Fewer fringe sports available than more established states

Online casinos — what are your options?

Online sportsbooks have been legalized in the US, online casinos have not. Does this mean you can’t spin slots? No. There are two main options available to you. The first; just play offline — inconvenient if you live in NYC, but casinos exist on tribal lands.

Another option? Sweeps casinos. Predominantly ‘free versions’ run by established gambling operators such as BetRivers.NET, they operate in a legal area that is more beige than gray. They do this by offering cash prizes for play and selling virtual currencies, rather than directly allowing you to gamble. These are what we recommend to NY gamblers.

Most of these are located and registered on US soil, meaning they’re accountable to US player protection laws.

• You can play casino games 
• You can win real money

• Way less viable than officially legalized states

Online poker — available at social casinos

The poker situation is practically the same as the casino one. Online gambling casinos aren’t fully a thing in NY, but you can play offline, or use sweeps casinos to play poker.

Fans who are looking for poker gambling in New York are actually pretty lucky here, because BetRivers.NET is one of the social options available in NY.

They’re part of Rush Street Gaming, who operate fully-fledged online casino brands SugarHouse and BetRivers in practically every legal state. They’re also one of the few social casinos to run live dealer game streams you can participate in.

That means you’ll get to play online poker whether it’s on a virtual poker table or a human-operated one.

• Available in NY
• Live tables available in NY

• Weaker offerings than more established states

Other forms of gambling in New York

When it comes to stuff beyond the big three, New York online gambling still has plenty to provide. Most prominent among these is probably the lottery, with most of the daily numbers NY has to offer being regularly updated online. New York DFS (Daily Fantasy Sports) is next in the popularity line.

NY gambling in the lottery sphere is a little weird when it comes to online. As it stands, it seems like you can’t buy individual lottery tickets online, and will have to visit a local retailer.

However, you can purchase and manage subscriptions to certain lotteries such as Mega Millions online. In FY 2021, the lottery generated $8.59 billion in revenue, $3.59 billion of which went to improve education.

Offline gambling in New York state

While bingo and the lottery make up a good chunk of NY’s offline gambling, the main talking point here is the offline casino section. New York gambling laws technically state that you have to be 18 to play, though it’s a little murky until you get to 21 due to alcohol laws, so players younger than that might still be turned away.

The offline casino sector is primarily serviced by with wider NYS area, with laws having historically relegated casinos to tribal land, and having kept casinos out of NYC. However, this changed in 2013, legalizing commercial casinos and allowing them within city limits. To date, only one exists inside the city (Resorts World New York City).

There are technically 25 casinos in the Empire State, once you include all the Racinos, though Monticello has closed the casino part of its racetrack, bringing it back down to an even two dozen.

NY online gambling and safety

Gambling in New York is legal, and legalization requires enforcement. That’s carried out by the New York Gaming Commission, who licenses and regulates the legal sportsbooks in New York state.

All licensed and legal operators are displayed on a list on the NYGC’s website, so you can always make sure you’re playing at a legal site. When it comes to online gambling New York also allows you to download PDFs of the weekly and monthly financial reports of each operator directly from their list, increasing the transparency.

Gambling sites are required to have info on responsible gambling, linking to information and help organizations like Gamblers Anonymous, New York Problem Gambling Resource Centers, and the New York Council on Problem Gambling.

The NYGC, NYCPG, and the Office of Alcoholism and Substance Abuse Services (OASAS), all work to ensure gambling is a safe pastime in the Empire State.

FAQs

Sources

• https://www.tax.ny.gov/pit/
• https://www.medowscpa.com/nyc-cpa-on-new-sports-gambling-tax-implications/