Thus, they are taxed on the gross gambling winnings.įor nonresident aliens, gambling winnings are subject to a 30% withholding tax. Nonresident aliens are not able to offset gambling income with gambling expenses.
The rules for gambling winnings received by non-resident aliens are different. Gambling income is offset by deductions for expenses incurred to obtain the winnings. This includes winnings from slot machines. The general rule is that gambling winnings are subject to income tax. The IRS audited the taxpayers return and made adjustments for the gambling income. But the casino reported the winnings to the IRS on a W-2G, Certain Gambling Winnings.
The taxpayers returns did not report the gambling income or expenses. The casino’s records showed that taxpayer-husband had losses in excess of his winnings. The casino withheld $30,480 from the winnings. He won 138 slot machine jackpots that totaled $431,658.
Taxpayer-husband frequented a casino during these trips to play the slot machines. The taxpayers are South Koreans who visited California for vacation.
