Now that sports betting has become commonplace, a lot of players have questions about gambling taxes in Illinois. Let’s look at the facts so you fully understand your tax responsibilities.
Yes, you have to pay taxes on all forms of income in Illinois, and gambling is no different. One of the misconceptions is that there is a “gambling tax” with some fixed rate, but this is not the case.
Winners are required to report their winnings when they file their state and local income tax returns. The rate of taxation that is paid will depend on the filing status and the overall taxable income.
The IRS will be notified under certain circumstances. The gaming entity will report winnings to the IRS on a Form W-2G if you:
Yes, you have to report the income to comply with IRS regulations, even if you never received a W-2G.
Under most circumstances, the Illinois sportsbook will not be required to withhold anything in advance. However, when your winnings exceed a certain threshold, the IRS and the Illinois state tax authorities compel them to withhold a certain percentage.
According to an IRS publication on the subject, if you win more than $5,000, the casino or sportsbook may be required to withhold 28% of your winnings.
Illinois has a 4.95% flat state income tax rate, and this is the percentage that would be withheld at the state level. For lottery winnings, they withhold the 4.95% if you win $1,000 or more.
There is no set threshold for gambling taxes in Illinois. Technically, if you win $1, it is taxable income.
You have to report the gambling winnings as “other income” on Form 1040 or Form 1040-SR, whether you received a Form W-2G or not.
Yes, if you live in Illinois and you win money on a vacation in Las Vegas, you have to claim the income when you file your federal return. The same is true for your Illinois state income tax return, even if you did not win the money in Illinois.
Payers will use Form 5754 when preparing a W-2G to inform the IRS that the individual receiving the winnings is part of a group. Subsequently, each individual will claim their respective share of the profits when they file their taxes.
Once again, there is no “Illinois lottery tax” per se. If you win the Illinois lottery, you are receiving taxable income and you must report it when you file your tax returns.
The revenue that is generated is used to bolster important state funds like the Capital Projects Fund, the Common School Fund, the Rebuild Illinois Projects Fund, and the Education Assistance Fund.
For federal taxes, you can deduct gambling losses only if you itemize, and only up to the amount of your reported winnings—good records are required. Illinois, however, does not allow a state deduction for gambling losses, so your Illinois taxable income won’t be reduced by them even if you itemize federally.
Looking ahead, a new federal law set to take effect for tax year 2026 caps the deduction further, allowing only 90% of gambling losses (still limited to the amount of winnings). If that holds, many bettors could face “phantom income” at the federal level even when they break even.
Keep receipts, app statements, and session logs, and consider professional advice if you have significant wins.
If you’re looking for an Illinois gambling tax calculator, you may find an imposter, but the real thing doesn’t exist. Since no federal or state “gambling tax” exists, there cannot be an authentic gambling tax calculator.
This applies to a sports betting gambling calculator or any other type of gambling tax calculator. Your overall taxable income is going to include all sources of income, including gambling, and there will be deductions and credits.
There are standard income tax calculators out there, and you can use one of those and simply include your gambling winnings with the rest of your income, deductions, and credits to get an estimate.
Yes, you can deduct gambling losses on your tax returns if you itemize and you are using the losses to offset gambling winnings for tax purposes.
A Failure to Pay penalty will be assessed by the Internal Revenue Service if they find out that you have unpaid taxes. The penalty is equal to .05% for each month that you failed to satisfy the debt, up to a maximum of 25%.
Yes, as with any other sportsbook in Illinois, you need to pay taxes on winnings you make on FanDuel and DraftKings.
