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Kentucky gambling tax

On this KYBetting.com page, you will find everything you need to know about Kentucky gambling taxes, including tax rates, a tax calculator, and much more.

Johnny Covers By: Johnny Covers
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From both a state and federal perspective, Kentucky imposes taxes on all gambling winnings in the state, which are taxed as income. Currently, the only forms of gambling that are legal in Kentucky are horse race betting, the state lottery, and most recently (2023), sports betting.

Kentucky gambling tax is a critical topic to be aware of for any gambler in the Bluegrass State, as we take a closer look at what to expect when Uncle Sam comes calling at the end of each year.

Do you have to pay tax on gambling in Kentucky?

Yes, you must pay taxes on gambling winnings in Kentucky, as they are considered income and subject to both state and federal taxes. In the state of Kentucky, the tax rate for gambling winnings is a flat rate and includes winnings from the state lottery, sports betting, and horse race betting.

For any gambling wins of size, such as from a casino, sports betting operator, or the Kentucky Lottery, you will be provided with a W-2G which details your winnings and the taxes already withheld. Make sure to include all winnings on your tax returns, regardless of whether the taxes were withheld at the time of payment.

If you are a regular gambler, it’s a good idea to keep detailed records of your wins and losses so you can itemize your winnings accordingly on your tax returns. It’s also important to know that you can deduct gambling losses on your Kentucky state tax return, but not more than your winnings.

Do note that in the case of an audit, you’ll be asked to provide documentation for both your losses and winnings, which can include tickets, statements, and receipts totaling the amount recorded. It is always recommended to consult with a tax professional to ensure you are complying with applicable tax laws.

What are the gambling tax rates in KY?

Kentucky State Gambling Taxes

With the launch of sports betting in 2023, the Bluegrass State has a plethora of new gamblers trying to figure out Kentuck gambling taxes. In the state of Kentucky, the gambling tax is a flat 6% of all winnings, less the amount risked and any losses.

With sports betting legislation passing in March of 2023, new taxes specific to sports betting were introduced in the state. For retail sports betting, there is a gambling tax rate in KY of 9.75%, with online sportsbooks imposing a tax rate of 14.25%.

Federal Gambling Taxes

In addition to the 6% flat tax rate that Kentucky gambling winners are subject to, you also have to account for Federal gambling taxes. Considered taxable income, any Kentucky gambling winnings are added to your total taxable income and vary depending on your income and filing status. Below is a schedule for single filers in 2023:

  • 10% on taxable income up to $11,000
  • 12% on taxable income over $11,000 to $44,725
  • 22% on taxable income over $44,725 to $95,375
  • 24% on taxable income over $95,375 to $182,100
  • 32% on taxable income over $182,100 to $231,250
  • 35% on taxable income over $231,250 to $578,125
  • 37% on taxable income over $578,125

As previously mentioned, large gambling winnings have Federal tax withheld at the time of payout and usually come in the form of a 24% flat rate. With Federal gambling taxes, you can itemize your losses as deductions from your winnings in a given year.

Tax calculator for gambling in Kentucky

When you are calculating your taxes from gambling in Kentucky, there are a number of considerations, both on a state and federal level, that you will want to consider for your tax basis. Fortunately, there are a plethora of tax calculators for gambling in Kentucky that can be used to determine your taxes.

A few vital pieces of information you will want to have ready are the state where the gambling winnings were received (Kentucky), your filing status (Single, Married, Head of Household, or Surviving Spouse), total taxable income (annual), and the amount of winnings you received from gambling.

History of gambling tax laws in Kentucky

With gambling in Kentucky dating back to the 19th century, the Bluegrass State has a long history of residents seeking action. Let’s take a closer look at the history of gambling tax laws in Kentucky, and how we got to where we are today.

  • 1875: Setting off Kentuckians' love of gambling, the first Kentucky Derby was held in front of 10,000 fans at the Louisville Jockey Club. Eight years later in 1883, Churchill Downs would host the race for the first time, where it remains today.
  • 1989: More than 100 years after the first horse race, Kentucky joined the nationwide lottery in 1988 with its own Kentucky Lottery, with 60% of voters approving the commission. On April 4, 1989, the first Kentucky Lottery ticket was sold, with 28% of all revenue going to the Kentucky State Treasury, primarily to fund state education programs.
  • 2003: After historically being 4%, Regulation 103 KAR went into effect to amend the state gambling tax to 6%.
  • 2023: House Bill 551 was officially signed into law by Governor Andy Beshear, which legalized sports betting in both retail locations and online. With it came two new tax rates, a 9.75% tax rate for retail sportsbooks and a 14.25% tax rate for online sportsbooks.

How do you file taxes for Kentucky gambling winnings?

For many, filing taxes can be a confusing and daunting process, despite it being a necessary one. Below, we’ve simplified things to a few easy steps on how you should file taxes for Kentucky gambling winnings.

  1. Prepare Tax Documents: If you are a big winner from a legal gambling operator, you’ll receive documentation in the form of a W-2G to prove your winnings were reported. If you are a regular gambler, it’s good practice to maintain detailed records of your winnings and losses to be able to itemize your deductions accordingly.
  2. Complete Your Federal & State Tax Returns: Add up all of your gambling winnings, and then deduct any losses from that amount. That number must be included as income on your Federal tax return on your Form 1040. The itemized deductions will go against your winnings on your Schedule A. The same winnings calculated in above must also be listed on your Kentucky State tax return.
  3. File & Pay Taxes Due: With your Federal and State tax returns now complete, take a look over them one final time to ensure they are accurate. Using tax software such as Turbo Tax, or mailing in a hard copy, the time has now come to officially file your taxes. If you owe, make sure you pay by the filing deadline to avoid penalties, which may come with interest.

What happens if I don’t report my gambling winnings in Kentucky?

Not reporting your gambling winnings in Kentucky can come with real consequences, both on a state and federal level. Below are just a couple of the possible penalties for not reporting your winnings from gambling in Kentucky.

  • Penalties: Not paying on time comes with a penalty of 5% on the unpaid taxes for each month that goes by, with a maximum penalty of 25%.
  • Underpayment Penalty: Both the Federal government and State of Kentucky will charge you a penalty if they deem you have not reported the full amount of your winnings. They will charge anywhere up to 20% of the portion that is underpaid.
  • Audit: By underreporting or not reporting your gambling winnings in Kentucky, you are opening yourself up to the chance of being audited by the IRS.

FAQ

How much tax does Kentucky gambling bring the state?

While sports betting is still relatively new in Kentucky, estimates are already expected for the state to exceed $20 million in revenue in the first year.

Do you have to pay tax on slot winnings in KY?

Yes, you must pay tax on slot winnings in KY in the form of the 6% flat tax rate on gambling winnings.

Have the gambling tax laws changed in Kentucky recently?

Yes, the gambling tax laws have changed in Kentucky recently, as new sports betting legislation has introduced new excuse taxes. For retail sports betting, which is done at an in-person sportsbook, there is a tax rate of 9.75% on the adjusted gross revenue. For online sports betting winnings, the tax rate increases to 14.25%.

Which form do you need to report gambling taxes in Kentucky?

In order to report gambling taxes in Kentucky, you must use the amount from Form W-2G if you receive one from a gambling operator. That information goes on your Form 1040 as part of your income. For state income taxes on gambling winnings, they must be reported on Form 740.

Author Details

Johnny Covers

Johnny Covers

Johnny Covers is a distinguished sports betting expert and author at KY Betting. With nearly ten years of industry experience, Johnny has earned acclaim for his outstanding handicapping abilities. His insightful perspectives have graced several esteemed sports and betting publications, such as All-In Magazine, Blitz Predict, FantasyPros, Betting Pros, Sportsbook Review, Golf Monthly, and OddsChecker. Johnny's dedication to delivering precise and valuable content has solidified his status as a trusted authority in the sports betting world, making him an invaluable asset to the KY Betting team.