Sports betting is legal in Kansas. Now that it is live, you'll want to take time to understand how sports betting winnings are taxed in Kansas. That's right, you will be expected to pay taxes on anything you take home from Kansas sportsbooks. How much tax should you expect to pay on your winnings? When you should pay this tax? We cover everything you need to know about gambling winning tax in Kansas.
In this guide, we'll look at how your Kansas tax gambling proceeds will be taxed. This can be a complicated process, so it is always advisable to consult a financial expert to make sure your returns are accurate.
The amount of tax you will have to pay under Kansas tax gambling laws will depend on your annual income and tax bracket. You can get an indication of how much you will have to pay in Kansas gambling taxes by filling in your details on our tax calculator:
The marginal tax rate is the bracket where your income places you. The effective tax rate, meanwhile, is the percentage you will have to pay once standard deductions are taken into account. Kansas operates a graduated individual income tax scale, with rates ranging from 3.1% to 5.7%. At present, the Kansas Lottery withholds a flat rate of 5% to cover state tax on big wins.
You should expect to pay taxes on gambling in Kansas. That covers the state lottery, pari-mutuel bets on horse racing, gambling at tribal and state-owned casinos and sports betting at retail locations, online sites and apps.
All income from gambling is viewed as taxable revenue by the Internal Revenue Service (IRS), and should be declared on your state and federal tax returns. If you enjoy a big win, your Kansas betting app can withhold an amount that, tax-wise, covers both your federal and state affairs. This should be indicated in a W-2G form sent to you by the casino or sportsbook. Even if you do not receive a W-2G, you are still expected to include all your winnings from all forms of gambling in your annual tax returns.
The Kansas Racing and Gaming Commission along with the Kansas Department of Revenue has set tax rates for gambling in Kansas. These rates apply to sports betting operators, as well as any casino, lottery and pari-mutuel betting establishment.
If you win more than $600 on the state lottery or a casino, the operator in question should automatically withhold 24% of your prize to cover federal tax. A tax will be withheld from gambling proceeds. This is dependent on your annual income.
The most important form to look out for is a W-2G. This should be sent automatically to you by any gambling operator - it will include the amount won, as well as the level of tax withheld. The company in question should also send a copy of the form to the IRS. The current thresholds above which you should be sent a W-2G relating to certain types of gambling in Kansas are as follows:
A W-2G does not have to be submitted for table games at a casino such as roulette and blackjack; however, you should still keep track of your wins and losses.
If the amount you win does not meet the relevant threshold in the list above - probably $600 in the case of sports betting - you will not be sent a W-2G. Nevertheless, any winnings you have made from sports wagers will still be considered taxable income and you should still expect to include them in your tax returns.
This is the principal reason why you should keep an accurate record of all your gambling activity. The good news when it comes to online betting is that the sportsbook where you have an account should a complete record of all your bets over the previous calendar year. However, we still strongly suggest you maintain your own notes so that you know precisely how much you have won or lose.
It is possible to deduct Kansas gambling losses on your tax return. However, this is only the case if you are able to itemize those losses. This can be done using Schedule A, and please bear in mind that your losses in any year cannot exceed your winnings. So if you had winnings of $2,000 and losses of $5,000, your deduction is capped at $2,000.
If you do itemize your losses, the IRS may ask for your records to substantiate your claim - this is where keeping that list of wins and losses up to date is so crucial. The documents you submit can include any W-2G forms, Form 5754 relating to group winnings (see below), any receipts from bets struck, and your credit records and bank statements.
As with any other form of gambling, if you win a prize on the state lottery in Kansas you should expect to pay tax on it. The process you need to follow depends on the size of your payout.
If you win less than $600, the lottery operator will not withhold any tax.
For wins between $601 and $5,000, the lottery will not withhold any tax, but you should receive a W-2G form - which will be shared with the IRS.
When you win more than $5,000, the lottery automatically withholds 24% in federal tax and 5% for state tax.
If you are the leader of a syndicate or group that wins a lottery prize, you will not want to pay tax on the total payout - just the portion of it that comes to you. In these circumstances, you need to fill in Form 5754. Everyone in the group who is sharing the winnings needs to provide photo ID and their Social Security number, and they all need to sign the form. One person will be named as the primary winner, then W-2G forms and checks - from which federal and state tax will be deducted - are sent to each member of your syndicate.
Some lottery competitions are, of course, run on a federal basis rather than by the state in question. However, if you are a Kansas resident and you win on a game such as Powerball or MegaMillions, the same rules apply when it comes to the amount of tax you should expect to pay, and the process of withholding. On any substantial win - whether it comes in the form of a lump sum or a payment over several years - you will be liable for 24% in federal tax and 5% in state revenue.
Failure to report any money you make from gambling could be a serious and expensive business. If the IRS works out that you have not paid the amount due, you will be compelled to pay up in full - and there may be extra interest and penalties added on top.
Any time you receive a W-2G form, the IRS receives a copy - so the agency already has an insight into your winnings. It will not be informed if your income from gambling does not meet the threshold, but the IRS holds firm by its position that all forms of revenue from wagering must be declared as part of your annual tax returns.
Sports betting is legal in Kansas. You can place a legal bet online or in person as long as you are within the state and 21 years of age or older.
The state will collect a 10% tax on every bet with 80% of that revenue being put into a fund to attract major league sports teams, including the Kansas City Chiefs to come to the state. Individual bettors can expect to be taxed as ordinary income.
You cannot claim gambling losses in Kansas as an itemized deduction. This law was introduced by the Kansas Legislation in 2014. Casinos did not oppose the law - which was put into place to deter people away from gambling if they could not afford to do so.
You cannot write off losses from a Kansas online casino because these are technically not legal. Moreover, you cannot write off any type of gambling losses on your taxes.
Anyone who wins a lottery in Kansas will be subjected to a 5% flat tax. This is in addition to a 24% federal tax.
Martin Booth is the senior betting analyst for BetKansas.com. He is an award-winning contributor and expert in sports betting and casino gaming around the world. From legislative updates in Kansas to breaking down the top betting apps, Martin Booth covers a gambit of topics surrounding Kansas sports betting. He is one of the most trusted voices in online gambling and will continue to be a leading voice in the Kansas sports betting market.