Gambling winnings are fully taxable by the Commonwealth of Pennsylvania. State residents must pay state income tax on all gambling and lottery winnings from any source, except for non-cash prizes from playing the Pennsylvania State Lottery. As a resident, you must include lottery winnings from other states and countries.
Pennsylvania Tax Rate for Gambling Winnings
Pennsylvania personal income tax is currently levied at the rate of 3.07 percent against taxable income, including gambling and lottery winnings.
In addition to cash, taxable gambling and winnings may include the value of non-cash prizes (vacations, automobiles, etc.), except for those non-cash prizes won from playing the Pennsylvania State Lottery. Expenses related to any gambling or lottery activities, such as meals or lodging, may not be deducted from your tax liability. It's important to note that while non-cash prizes from the Pennsylvania State Lottery may not be taxable under state law, they are still subject to federal income taxes (see IRS Form W-2G, Certain Gambling Winnings).
Powerball and Mega Millions
Due to a change in law that took effect on January 1, 2016, any cash prize that you win from a Powerball or Mega Millions ticket in Pennsylvania, or any other state, is taxable for state purposes. Spouses must report their winnings separately. All of this is in addition to any federal taxes you may have to pay to the IRS.
Pennsylvania Gambling Tax Laws: An Overview
While sifting through statutes may sometimes be necessary to answer a specific question, sometimes it helps to have a digestable summary. Below is a table that provides you with both -- a link to the relevant statute and a plain English description of Pennsylvania's gambling tax laws. You can also see Tax Law, and IRS Audits for more information.
Pennsylvania Statutes Title 72, Section 7303(a)(7)
|Enforcement Agencies||Pennsylvania Department of Revenue|
|What Gambling and Lottery Winnings are Taxable?||
Cash, the value of property (automobiles, jewelry, electronic devices, appliances, clothes, etc.), the value of the use of property (trips, vacations, airline tickets, cruise, etc.), and other items of value.
|Reporting Requirements||Residents and nonresidents use PA-40 Schedule T, Gambling and Lottery Winnings (PDF) to report amount(s) of gambling and lottery winnings.|
|Gambling Expenses Deductible?||No, expenses attributable to gambling and lottery income are deductible, such as: parking, postage, entry fees, meals and lodging or travel.|
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
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Pennsylvania Gambling Tax Laws: Related Resources
Get Legal Help to Better Understand Pennsylvania's Gambling Tax Laws
Gambling tax laws can sometimes get complicated. For this reason, it may be a good idea to consult an experienced tax lawyer in Pennsylvania if you have questions about your specific situation.
Contact a qualified attorney.