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New Jersey spearheaded the online gambling industry in America after Governor Chris Christie signed Assembly Bill 2578 into law in 2013. It amended the state’s Casino Control Act, with the new legislation allowing Atlantic City casinos to provide online wagering services. Activities in the state are overseen by the New Jersey Casino Control Commission (CCC) and the NJ Division of Gaming Enforcement (NJDGE).
The CCC is the state agency responsible for traditional gambling and licensing of New Jersey's casinos, while the NJDGE is an enforcement arm that acts on the Casino Control Act for NJ online casinos. They regularly audit operators, ensuring land-based casinos operate sites, have appropriate online licensing, and follow responsible gambling measures. They also set the tax rates for online sites and NJ casino apps at 15%, with an additional 2.5-5% for an investment alternative tax to help the state generate additional tax revenues.
NJ is open to online casino gaming, sports betting, horse racing, poker rooms, lottery, and keno. It’s the most progressive state in the US, and activities are available to residents and tourists over 21. This page explores the legality & taxes for New Jersey gambling online.
Discover everything you need to pay taxes and enjoy stress-free gaming. Learn about gambling tax liability, managing your losses and winnings, and how to file your federal and state tax forms.
Where Can I Legally Gamble Online in New Jersey?
Since November 2013, patrons in NJ have been able to legally wager online at casinos, sportsbooks, poker sites, lotteries, keno, and bingo.
This open landscape saw many companies partner with local NJ casinos to start online operations. Many big brands established their online reputation here, including BetMGM, Caesars Palace, Tipico, and Golden Nugget.
- Online Casinos: Patrons can win real money playing slots, virtual table games, progressive jackpots, and live dealer games at the best NJ online casino sites like Caesars and BetMGM.
- Online Poker: Poker is booming in NJ, with top sites like 888, PokerStars, and WSOP open with 24/7 cash games and big prize pool poker tournaments.
- Sports Betting: After the PASPA Act was abolished in 2018, New Jersey moved quickly to set up online sports betting, signing a bill the same year. In June 2018, sportsbooks started accepting wagers, and now locals can sign up for top US sportsbooks and bet on horse races and sports.
- Lottery: The NJ Lottery offers fun online games, lotto draws, and keno. Patrons can purchase tickets online or offline and even participate in multistate lottery draws, with potential lottery winnings reaching hundreds of millions.
Are There Any Responsible Gambling Measures in Place?
New Jersey gambling regulations have specific guidelines in place to protect players. Businesses operating online must verify customers' identity and ensure sign-ups are over 21 and located within the state.
The sites must have responsible gambling account tools so you can set budgets. These controls let you set daily, weekly, or monthly limits for deposits, wagers, or gambling losses. The DGE has systems to help operators identify problem gambling, including if users wager over $1,000,000 in three months, continuously canceling withdrawals, increases in wagering activity, and other behavior guidelines.
Also, operators have to disclose all the terms and conditions of the NJ online casino bonus offers, including NJ casino no deposit bonus offers.
These measures help businesses spot users with potential problems and offer responsible gambling advice and assistance, including links for external help.
Are Gambling Winnings Taxable in New Jersey?
If you play online or offline and have gambling winnings, it’s classed as taxable income in New Jersey. The state taxes 3%, and licensed operators will automatically withhold the 3% if patrons reach the threshold.
The federal gambling tax rate is 24%. Operators hold it if the winnings are above the federal withholding rates. You’re responsible for reporting gambling income to the NJ Division of Tax using the Resident Income Tax Return form NJ-1040.
Is The NJ Winnings Tax Rate Different For Each Type of Gambling?
The tax liability varies depending on how much you win gambling online in New Jersey. Current federal law sets a fixed 24% rate for regulated gambling, and the state has a 3% income tax rate applicable to winnings, bringing the total tax to 27%.
It varies slightly for the lottery, which has separate state taxes. The table below lists the different gambling activities, their tax and income rates, and the winnings threshold before paying tax.
Taxes on New Jersey Lottery Winnings
The Lottery in NJ provides exciting games and lotto draws, including Pick 4, Quick Draw, Cash Pop, Powerball, and Mega Millions. In New Jersey, they have different lottery gambling tax rates. A W2-G form is sent for wins over $600.
Customers can enjoy tax-free winnings up to $10,000. State lottery payouts from $10,001 to $499,999 have a lottery tax of 5% in NJ and 24% for federal, plus 3% for state taxes. This adds up to an overall taxable New Jersey lottery rate of 32%. You must also report physical prizes taxed at the fair market value.
Wins over $500,000 have an 8% local gambling tax rate on top of the 24% and 3%, equalling 35% of the prize value. Failing to supply a valid taxpayer identification number (TIN) results in a higher 8% local tax and 30% federal withholding rate for wins over $10,000. It's important to note that taxes for lottery on apply to single wins, so if you have a $5,000 win and $7,000 win, they both fall under the taxable amount.
Rules on Multiple Lottery Wins
The rules for multistate lotteries are the same as the state lottery. The NJ Lottery offers many draws, including ones open to individuals in other US states. These competitions can generate huge prize pools reaching hundreds of millions and are popular with many local patrons.
A 5% NJ tax applies for any win over $10,000 and 8% for wins above $500,000. Like local operators, the provider will supply a W2-G form and withhold the 24% federal tax rate.
How to Report New Jersey Gambling Winnings
There are several steps involved in reporting your gambling income for wins from games like online blackjack NJ or online roulette New Jersey. The operator will send a W-2G form if you win over the threshold. It lists essential details on your activity, including reportable winnings, type of wagers, and any state and federal gambling taxes to pay.
Even if you don’t receive the W-2G, you must still report local and federal taxes. We’ve outlined the steps below to help you through the reporting process.
- For more straightforward tax calculations, keeping detailed records or downloading your activity from the website can help. You will receive a copy of form W2-G from your gambling provider if you win a certain amount. Take note of all activities and calculate your overall winnings and losses.
- Download Form 1040 (Individual Income Tax Return) from the IRS website. Input your total gambling winnings in the ‘Other Income’ field.
- You must not choose the standard deduction if you wish to itemize deductions to reduce the payable tax. You’ll need the tax forms, Schedule 1 (Form 1040) – Additional Income and Adjustments to Income, and Schedule A (Form 1040) for Itemized Deductions.
- Calculate your total net winnings by deducting losses. Add this amended figure to Line 8b on Schedule 1. Then, fill out Schedule A with the total deductions.
- Send all forms to the IRS to pay your federal income tax on time and enjoy your gambling winnings without additional penalties.
- Comply with state tax obligations by filing a New Jersey tax return. Get a copy of the NJ Resident Income Tax Return (Form NJ-1040), and input your total gambling income in the ‘Net Gambling Winnings’ category. Make sure you input the total prize value for accurate reporting.
Federal Tax Form W2-G - A Closer Look
The federal W2-G is a tax form issued by gambling providers to customers. It outlines all gambling activities, including total wager, winnings losses, and any taxes withheld. Regulations require the form to be sent to customers if their gambling winnings exceed a particular threshold.
The land based casino and online partner sends a copy to the Internal Revenue Service (IRS). It helps when filing returns, as you can see all the details and calculate the amount to pay taxes on. Winning above the thresholds below will result in receiving the form:
- Bingo - $1,200
- Keno - $1,500
- NJ Online Slots - $1,200
- Sports: $600 or 300x Wager
- Lottery: $600
- NJ Online Poker: $5,000
What If I Don’t Receive a W-2G?
You should expect to receive the W-2G form if you've been placing bets and won a decent amount gambling. Providers must send copies to the tax agency and customer. If you are still waiting to receive one, the first step is to contact the website where you gamble and request a copy.
Even without one, you must still report taxes. You can do this manually by keeping detailed records of your deposits, withdrawals, wins, losses, and other activities and calculating the overall taxable income.
Can Gambling Losses Offset Winnings?
If you've been lucky enough to win money gambling, the good news is that you can offset your winnings by deducting your gambling losses. It's important to note you can't deduct more than you win. For example, if you have won $20,000 but lost $30,000 in the year, you could deduct up to $20,000.
You can deduct certain costs relating to gambling activities, for example, the buy-in cost for a poker tournament or lottery ticket prices. To list deductions, you should opt out of the standard deduction on Form 1040. The Schedule A (Form 1040) Itemized Deductions is required to deduct gambling losses from your income.
When making deductions, keeping detailed records of your gambling winnings and copies of physical or digital receipts, including deposits, withdrawals, wagering slips, and lottery prize tickets, is vital. The IRS may require you to present these records to support your claim.
What Happens If I Don't Report Gambling Winnings?
Failing to report gambling winnings in your gross income tax isn’t wise. The Internal Revenue Service adds a 5% monthly penalty for late payments, which can reach up to 25% in additional fees.
Suppose you fail to report or the total income doesn’t add up to information the IRS has. In that case, they may issue you a CP2000 Notice for Underreported Income. To minimize your tax liability, include all sources of income and always file your returns on time.
Do You Have to Pay Tax If You Use Offshore Gambling Sites?
Anyone who conducts illegal gambling on offshore licensed sites runs many risks. The NJDGE doesn't regulate these platforms or their products, and players cannot complain to local authorities. The offshore locations make it much harder for players to remain protected and gamble safely.
On top of this, any income earned while in the US must be reported to the IRS. So, if you win gambling offshore, you must report it. However, you can't deduct gambling losses from your income tax because the sites aren't locally regulated or paying US taxes.
