How the U.S. Taxes Gambling Winnings

It can be surprising to learn that even if you’re living in a flat in London or a beach house in Tokyo, the IRS still hitches a ride on your trips to the casino. Because the U.S. taxes based on citizenship rather than where you live, gambling winnings are treated just like any other income.

Here is a friendly guide to navigating the rules for expats and foreign visitors alike.

The Big Picture: Who Owes What?

The way the U.S. taxes gambling depends entirely on your “tax DNA.” Here’s a quick glance at the landscape:

Situation	How the U.S. Taxes You
U.S. Citizen Expat	Your worldwide income is taxable, no matter where you win.
Foreigner in the U.S.	30% is usually withheld from winnings unless a treaty applies.
Foreigner outside the U.S.	The U.S. generally has no claim to this money.

Not Sure How Gambling Winnings Affect Your U.S. Taxes?

If you live abroad or gambled outside the U.S., an expat tax specialist can help you understand what needs to be reported and what doesn’t.

U.S. Citizen Expats: How Gambling Winnings Are Taxed

If you hold a U.S. passport, the IRS views your winnings the same way whether they come from a Vegas slot machine or a local raffle in Paris.

What You Must Report

You are required to report all winnings on your Form 1040 (Schedule 1). This includes:

Casino games and poker tournaments.
Lottery prizes and sports betting.
Online gambling and even foreign “luck-based” prizes.

New for 2026: The “Phantom Income” Rule

Starting in 2026, the One Big Beautiful Bill Act (OBBBA) introduces a major change to how you deduct losses.

The “Haircut”: You can now only deduct 90% of your losses against your winnings.
The Result: If you win $10,000 and lose $10,000, you previously owed $0 in tax. Under the new law, you can only deduct $9,000 in losses, leaving you with $1,000 of “phantom income” that you must pay tax on—even though you didn’t actually make a profit.

The “Losses” Catch

You can deduct your losses to offset your wins, but there are four strict hurdles:

You must itemize: You have to skip the Standard Deduction and use Schedule A.
The Cap: You can only deduct losses up to the amount of your winnings. (Win $1k, lose $5k? You only deduct $1k).
Proof is required: You need a paper trail (logs, receipts, and tickets).
No “Net Loss”: Losses can’t be used to lower the tax you owe on your salary.

Two Common Expat Mistakes

The FEIE Trap: A common myth is that you can use the Foreign Earned Income Exclusion (FEIE) on gambling. Unfortunately, you can’t. The FEIE only applies to money you work for (earned income). Gambling is considered “unearned.”
Foreign Tax Credits (FTC): If the country where you live also taxes your win, you might be able to claim a Foreign Tax Credit on your U.S. return to avoid paying twice.

Gambling Losses for U.S. Expats

You can deduct gambling losses, but only if:

You itemize deductions on Schedule A
Losses do not exceed your winnings
You keep accurate records (tickets, receipts, logs)

Losses cannot create or increase a net loss.

For Non-U.S. Citizens: Winning on American Soil

If you’re a tourist or a foreign national visiting a U.S. casino, the rules shift.

The Default: 30% Withholding

By default, U.S. casinos and lotteries are required to take 30% right off the top before they hand you your prize. This is a “flat tax” on the total win, not your profit.

The “Treaty” Secret

The U.S. has tax treaties with many countries (like the UK, Germany, France, and Japan) that can reduce or even eliminate this 30% tax.

To claim it at the window: You’ll need a valid ITIN (Tax ID) and a Form W-8BEN.
To claim it later: If they already took the 30%, you can often file a Form 1040-NR later to ask for a refund.

Location Matters: California vs. Texas

When calculating your potential take-home pay, the state you are in is just as important as the federal rules.

Texas, Florida, and Nevada: These states have no state income tax, so you only deal with the 30% federal rate.
California: While California does not tax winnings from the California State Lottery, it does tax casino and other gambling winnings. For non-residents, California may withhold an additional 7% on winnings over $1,500.

“Free” Games

Interestingly, certain games are exempt from this 30% tax for foreigners. If you win at Blackjack, Baccarat, Craps, Roulette, or Big-6 wheel, the casino generally won’t withhold tax. However, slots and poker tournaments are still taxed.

Gambling Income Gets Complicated Across Borders

Tax treaties, foreign tax credits, and withholding rules can change what you owe — and whether you’re entitled to a refund.

Final Tips for Everyone

Age doesn’t matter: Even if you’re a senior citizen, the tax rules remain the same.
Keep a Log: Whether you’re an expat or a visitor, the IRS loves documentation. Keep a simple diary of dates, locations, and amounts.
Calculators are just a start: Online tax calculators often miss complex treaty rules or Foreign Tax Credits, so use them as a rough estimate only.

Tax laws for expats are notoriously “sticky.” If you’ve had a big win abroad, it’s often worth a quick chat with a professional to make sure you aren’t leaving money on the table, or accidentally triggering an IRS audit.

FAQs: Gambling Winnings & Expat Taxes

Do foreigners pay U.S. taxes on gambling winnings?

Yes, in many cases. Foreign citizens (nonresident aliens) who win money from gambling in the United States are generally subject to a 30% federal tax withholding unless a U.S. tax treaty provides an exemption or reduced rate.

Do U.S. expats have to report gambling winnings earned abroad?

Yes. U.S. citizens living abroad must report all worldwide income, including gambling winnings earned outside the U.S., on their U.S. tax return.

Are gambling winnings considered earned income for expats?

No. Gambling winnings are considered unearned income and do not qualify for the Foreign Earned Income Exclusion (FEIE).

Can U.S. expats deduct gambling losses?

Yes, but only up to the amount of gambling winnings, and only if the taxpayer itemizes deductions on Schedule A. Proper documentation is required.

Do tourists pay tax on Las Vegas gambling winnings?

Usually yes. Casinos are required to withhold 30% federal tax from gambling winnings paid to nonresident aliens unless a tax treaty exemption applies.

Which countries are exempt from U.S. gambling taxes under tax treaties?

Treaty benefits vary by country, but residents of countries such as the United Kingdom, Germany, France, Japan, and many EU countries may be exempt or eligible for reduced withholding. Each treaty has specific conditions.

How do nonresident aliens claim a refund of withheld gambling taxes?

If tax was withheld and a tax treaty applies, the individual can file Form 1040-NR and may need an ITIN to claim a refund of excess withholding.

Are any gambling games exempt from U.S. tax withholding for foreigners?

Yes. Winnings from certain table games, such as blackjack, baccarat, craps, roulette, and big-6 wheel, are exempt from the 30% withholding for nonresident aliens.

Do senior citizens have to pay taxes on gambling winnings?

Yes. Age does not exempt anyone from reporting or paying taxes on gambling winnings under U.S. tax law.

Can a gambling winnings tax calculator be trusted for expats?

Calculators can provide estimates, but they often do not account for tax treaties, foreign tax credits, or cross-border filing rules. Expats should use them cautiously.

What happens if gambling winnings are not reported?

Failure to report gambling income can lead to penalties, interest, and IRS compliance issues — even if no additional tax is ultimately owed.

Get Clarity Before You File

If gambling winnings are part of your tax picture this year, getting guidance from an expat-focused tax professional can help you stay compliant and avoid overpaying.