Millions of Canadians and other non-US residents win money in US casinos each year. However, many of them are shocked to find out that the Internal Revenue Service requires casinos and other gambling venues to withhold 30% of their winnings.
This is something that can take the sting out of any big casino jackpot or lotto winnings, especially when it leaves you with less than what you expected. The good news is that the withholding tax can be reclaimed if you follow some simple steps.
If you are a non-resident alien of the United States, you are required to pay a federal withholding tax of 30 percent on any gross gambling winnings over $1,200 (U.S.). This applies to bingo and slot machine winnings, as well as any amount you win at Keno, horse racing, dog racing, jai alai or state lotteries. Fortunately, Canadians are eligible to offset the withholding tax by offsetting it against any gambling losses they have incurred in the United States.
The key is to keep track of your winnings and losses. It’s also important to keep all of your wager stubs, receipts and credit card statements. That way, if you are audited by the IRS, you will have a paper trail to show your winnings and losses.
A cottage industry has grown up to help Canadians reclaim their gambling taxes in the United States. Porter Law Office, LLC, a full-service law firm and Certifying Acceptance Agent (CAA), helps clients get back the 30% withholding tax that casinos deduct from their gambling winnings. However, not everyone is eligible to file for a refund. Those who are eligible can obtain a full or partial tax refund by filing Form 1040NR, U.S. Nonresident Alien Income Tax Return, and proving their betting losses with documentation such as wager stubs, tickets or credit card receipts, Ms. Callicutt said. The treaty allows this because, she said, it is probably the only one that lets taxpayers claim betting losses against gambling winnings. It’s not an easy process and it can be costly to hire a professional, but the potential refund can be worth it.
