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Lottery and Gambling Winnings
Winning the Lottery or scoring on a sports wager can change your life in profound ways. Congratulations on your lucky break!
Just remember that your good fortune includes a responsibility to pay taxes and fees on those winnings.
In 2018, Governor Phil Murphy signed a law that authorized legal sports betting in New Jersey. The law (A4111) allows people, age 21 and over, to place sports bets over the internet or in person at New Jersey's casinos, racetracks, and former racetracks. Sports betting is now among the many forms of gambling winnings that are subject to the New Jersey Gross Income Tax, including legalized gambling (sports betting, casino, racetrack, etc.) and illegal gambling.
New Jersey Lottery winnings from prize amounts exceeding $10,000 became subject to the Gross Income Tax in January 2009.
- It’s also illegal for businesses to run gambling websites and to solicit online bets. Even companies handling transactions for cyberspace bettors can face federal charges. Our strategy for tackling illegal online gambling—as a key enforcement agency—is to start with the companies providing the services in the first place.
- Newark, New Jersey 07101 (973) 273-8000 Instructions for Filing the Raffle Report of Operations Pursuant to N.J.A.C. 13:47-9.1, licensees must file a report of operations with the Legalized Games of Chance Control Commission no later than the 15th day of the calendar month immediately following the calendar month in.
If you or someone you know has a gambling problem, crisis counseling and referral services can be accessed by calling 1-800-GAMBLER (1-800-426-2537) (IL). Gambling problem? Call 1-800-Gambler (NJ/WV/PA), 1-800-9-WITH-IT (IN), 1-800-522-4700 (CO) or 1-800-BETS OFF (IA). Illegal gambling operations prey upon vulnerable Americans, drain law enforcement resources and deprive communities of essential tax dollars.Withholding Rate from Gambling Winnings
New Jersey Income Tax is withheld at an amount equal to three percent (3%) of the payout for both New Jersey residents and nonresidents (N.J.S.A.
Withholding Rate from Lottery Winnings
The rate is determined by the amount of the payout. If a prize is taxable (i.e., over $10,000), the entire amount of the payout is subject to withholding, not just the amount in excess of $10,000. The withholding rates for gambling winnings paid by the New Jersey Lottery are as follows:
- 5% for Lottery payouts between $10,001 and $500,000;
- 8% for Lottery payouts over $500,000; and
- 8% for Lottery payouts over $10,000, if the claimant does not provide a valid Taxpayer Identification Number.
New Jersey Income Tax withholding is based on the total amount of the prize won. For example, if two people win a New Jersey Lottery prize of $14,000 and split the proceeds equally, $7,000 of income is taxable to each person and is subject to the 5% withholding rate. Both taxpayers would be subject to the 5% withholding because the total amount of the prize exceeded $10,000.
Companies that obtain the right to Lottery payments from the winner and receive Lottery payments are also subject to New Jersey withholdings. Each company is required to file for a refund of the tax withheld, if applicable. Lottery
New Jersey Lottery winnings from prize amounts exceeding $10,000 are taxable. The individual prize amount is the determining factor of taxability, not the total amount of Lottery winnings during the year.
Gambling and Lottery
- For example, if a person won the New Jersey Lottery twice in the same year, and the winning prize amounts were $5,000 and $6,000, these winnings would not be subject to New Jersey Gross Income Tax. However, if that person won the Lottery once and received a prize of $11,000, the winnings would be taxable.
- This standard for taxability applies to both residents and nonresidents.
- The New Jersey Lottery permits donating, splitting, and assigning Lottery proceeds to someone else or to a charity. If you choose to donate, split, or assign your Lottery winnings, in whole or in part, the value is taxable to the recipient in the same way as it is for federal income tax purposes.
Making Estimated Payments
If you will not have enough withholdings to cover your New Jersey Income Tax liability, you must make estimated payments to avoid interest and penalties. For more information on estimated payments, see GIT-8, Estimating Income Taxes.
Out-of-state lottery winnings are taxable for New Jersey Gross Income Tax purposes regardless of the amount.
Gambling winnings from a New Jersey location are taxable to nonresidents. Gambling includes the activities of sports betting and placing bets at casinos and racetracks.
Calculating Taxable Income
You may use your gambling losses to offset gambling winnings from the same year as long as they do not exceed your total winnings. If your losses were greater than your winnings, you cannot report the negative figure on your New Jersey tax return. You must claim zero income for net gambling winnings. For more information, see TB-20(R), Gambling Winnings or Losses.
You may be required to substantiate gambling losses used to offset winnings reported on your New Jersey tax return. Evidence of losses can include your losing tickets, a daily log or journal of wins and losses, canceled checks, notes, etc. You are not required to provide a detailed rider of gambling winnings and losses with your New Jersey tax return. However, if you report gambling winnings (net of losses) on your New Jersey return, you must attach a supporting statement indicating your total winnings and losses.
Reporting Taxable Winnings
Include taxable New Jersey Lottery and gambling winnings in the category of “net gambling winnings” on your New Jersey Gross Income Tax return.
If there’s anyone who is a must-listen about New Jersey sports betting, it’s David Rebuck.
The director of the Division of Gaming Enforcement (DGE) knows his turf better than anyone, overseeing all aspects of NJ gambling from regulation to implementation.
Rebuck appeared at a hearing of the Assembly Tourism, Gaming and the Arts committee on Thursday, offering deep insight into his staff’s operations. In addition to updates on the current and future market, his testimony included strong words about illegal offshore operations.
You can (and really should) listen to the hearing in full here.
Rebuck sets the stage
Chairman Ralph Caputo opened the meeting with glowing commendations for the director, his staff, and the lawmakers involved in the process. He cited sports betting as a boon for casinos and a “lifeline to the dying horse racing industry.”
So far, eight of the New Jersey’s 14 licensees have applied to offer sports betting, and all eight are operational.
According to Rebuck, some of the remaining permits will likely remain on the table:
“I think a lot has to do with their business decisions, about where they want to be in the future, the scope of how they want to engage in sports wagering. I do believe that not all 14 ultimately will apply for a license, but that’s their business decision.”
Eight online/mobile platforms are up and running, too. The DGE’s inbox is empty after approving the BetStars application, but the director is expecting more mail soon.
“There will be a lot more, because there is substantial interest,” Rebuck said.
And much of that interest comes from outside the US:
“We have a huge interest in operations from Europe, who have been very successful doing gambling over the years, coming to the United States right now. Some will not make it, I can assure you. And some will not even apply.”
NJ going after 100+ illegal operators?
A long-standing federal law prohibits foreign gambling companies from serving American customers.
But it’s a prohibition in principle alone at this point. A quick internet search turns up countless US-facing sportsbooks based in countries like Antigua and Costa Rica, all of which are openly violating the law.
Rebuck testified that the illegal gambling market is “massive” in the US, operating in broad daylight. “They are extremely robust,” he said. “They make our operations look like a five-and-dime store.”
According to Rebuck, the DGE is already looking at ways to address the problem.
“We’ve been researching this with our law enforcement partners to get a better understanding of how they operate in the United States … At this point in time, we’ve identified over 108 illegal websites that take sports wagers from every state in the United States today. They’re very good at what they do.”
The DGE has already warned operators about “significant consequences” for conducting business with companies violating federal law.
“You will not get licensed in NJ,” Rebuck said. “And I will fight you to get licensed in any state.”
Regulators are working with operators, partners, leagues, and the USDepartment of Justice “to begin looking at what [they can] do to work together to fight this scourge.”
This page includes an up-to-date list of all legal, licensed sportsbooks in NJ.
Working with leagues to monitor integrity
It’s no secret that NJ has had an adversarial relationship with the governing bodies of the US sports leagues. Those leagues, after all, dragged the state through a years-long legal battle that eventually ended up before the US Supreme Court.
That said, it takes a team effort to ensure the integrity of sports and sports betting. Rebuck testified that mutual mechanisms are in place, and they’ve already been tested a couple times since launch.
Here’s more from the director:
“We’ve already contacted the leagues. I’ve met with the NFL, I’ve met with the PGA [Tour]. We’ve begun our dialogue on how we will work together to share information when we have suspicious or unusual activity on their events.
“OK … remember what I said about the illegal sites? They better have a very strong system in play already, because the illegal sites are bigger than we are. We have good dialogue with the gaming operators for integrity, and we’ve already shared information.
“Yes, we have had issues that have not impacted any of the leagues, but we are aware of notices that came to us from an event at Wimbledon, as well as an event at the US Open that were identified — tennis — as suspicious.”
Potential issues are flagged to the DGE, which works to determine whether or not there is cause for concern. “Just because a matter is unusual or suspicious,” Rebuck added, “it doesn’t mean there is an integrity issue.”
Tennis, it should be said, does not have a great record for integrity in recent years, so NJ stakeholders are wise to be extra vigilant.
New Jersey charting its own course
Rebuck closed his testimony with a lap around the emerging US sports betting industry, reminding the committee that NJ will be competing against neighboring states like Pennsylvania and Delaware.
To a lesser extent, Rebuck even has his sights set on supplanting Nevada sports betting as the epicenter of the US industry. He rejected the notion that NJ copied — or even wanted to copy — Nevada’s model:
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“This business technology, this new commercial venture, we will do better than Nevada does. Because we have to. Nevada is a different market than we are in New Jersey. We are less a destination market than they are.”
Rebuck also commended the legislature for the structure of the law, which allows casino licensees to dictate the landscape. The properties themselves determine which brands can enter the marketplace, provided the DGE approves.
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The DGE expects a lull in new sports betting laws until after the midterm elections, after which Rebuck predicts a “tremendous uptick” in the appetite. “And that uptick will be driven by how well the state of New Jersey performs in the next four months,” he said. “If we fail, we might not have too much competition.”
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That comment drew a laugh from the committee, but Rebuck is correct. All eyes are on New Jersey right now. “We won’t fail,” he finished.
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Gaming consultancy Eilers & Krejcik recently projected that NJ sports betting revenue could surpass Nevada’s by 2021.