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Iowa gambling taxes

Paying taxes on your gambling winnings is a double-edged sword. On the one hand, it’s disappointing to have to surrender part of your winnings, but on the other, it means you’re winning money, which is always the goal!

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Read on to learn more about paying taxes on your gambling winnings in Iowa. You can also use our gambling taxes calculator tool, learn how to file, and stay up to date on tax-related gambling news in IA.

Is it required to pay tax on gambling in Iowa?

Yes, you are required to pay tax on your gambling winnings in Iowa, even if you are not an Iowa resident. Whether you’re gambling at a casino, betting on sports through a mobile app, playing the lottery, or wagering on horse races, you must report all winnings as taxable income.

If you win more than $600 while gambling, you will need to fill out form W-2G to file your tax paperwork correctly. This form is available on the Iowa Department of Revenue website.

What are the rates for gambling taxes in IA?

The rates for gambling taxes in IA are 5% locally and 24% on federal returns. The 24% rate is applicable in all states where gambling is legal, while the 5% local rate is roughly in the middle of Iowa’s income tax brackets.

Iowa is moving toward a flat 3.90% income tax rate in 2026. it is unclear whether gambling rates will hold steady or move closer in line with the flat tax percentage. We will update this page as further news becomes available.

How do you file taxes for Iowa gambling winnings?

Filing taxes for Iowa gambling winnings can be a bit tricky, so be sure to check carefully as you move through the forms. You can do so by following these steps, but you may also want to check with a certified tax professional before filing just to be safe.

  1. Calculate your gambling winnings: You may have been provided with a W-2G form from a gambling operator (or a few if you’ve been playing at multiple sportsbooks and casinos). If you did, check their calculations against the totals from your own records (add up all winnings and subtract all lost wagers to come up with your net total). This net will be the figure used to calculate other totals as you navigate the forms.
  2. Fill out your federal form: The easiest way to file taxes for Iowa gambling winnings is to fill out the federal form first. This is because many of the numbers from your Federal 1040 will carry over to IA-1040 for your state-level returns, especially if you are using tax preparation software. Your gambling winnings will go on your federal form, Schedule 1, line 8b.
  3. Transfer numbers from the federal to state forms: Next, using the same net total from above, calculate the Iowa withholding amount and fill it into IA 1040, line 63.
  4. Complete your forms and submit them: Once these totals are included, complete the rest of your tax paperwork as appropriate and file your state and federal returns. If you’re filing annually, you must send them in by April 15 unless that day falls on a weekend, in which case they’re due the following Monday.

History of gambling tax laws in Iowa

Iowa’s gambling tax laws have a somewhat complex history. Here are a few of the important dates to know regarding gambling legality and tax implications.

  • 1846: Iowa’s Constitution includes a provision that lottery gambling could not be sanctioned by the state. This provision would be broadly interpreted to include all games of chance.
  • 1971: A catholic pastor in North Buena Vista was arrested for running a gambling house during a picnic fundraiser for the church. Officials seized $600 (equivalent to just over $4,600 in 2024 dollars) along with the gambling equipment. This arrest would spark public outcry over the lottery ban provision and lead Governor Robert D. Ray to push for the ban’s removal.
  • 1972: Iowa voters legalize gambling in the state with 68% of voters in favor of the legislation. The bill also legalized social gaming and established a 24-hour loss limit of $500.
  • 1974: Iowa reigns in gambling activity with bans on craps and blackjack, among other games, along with bookkeeping offices. Additionally, the daily loss limit was lowered to $50.
  • 1983: Iowa legalizes betting on pari-mutuel horse racing and greyhound racing.
  • 1985: The Iowa Lottery is established, with tax revenue going toward veterans services, surviving family members of first responders who lost their lives in the line of duty, the Iowa Vision Project, and multiple other projects through the General Fund.
  • 1989: Iowa approves riverboat casino gaming, with winnings counted under income tax laws.
  • 2019: Iowa legalizes sports betting for both retail and online wagering.

What are the consequences if I don’t report my gambling winnings in Iowa?

If you don't report your gambling winnings in Iowa on your tax returns, several kinds of consequences could occur. The penalties scale depending on how much you underreported and how many instances of non-payment you had.

First, interest can accrue on the money you underreported. This interest compounds daily, meaning the costs can rack up in a hurry.

Next, you could be fined if the offenses are severe enough. These fines could be up to $5,000 per infraction.

Finally, if the failure to report is particularly egregious, you could be jailed, potentially in addition to the above consequences. Fortunately, none of this should scare you if you’re paying your taxes correctly!


FAQ

How much tax revenue does Iowa gambling bring the state?

According to the Iowa Racing and Gaming Commission, gambling tax revenue in Iowa brought the state more than $4B in revenue in FY 2023. This number includes casino gambling, sports betting, and horse race betting totals.

Are there any exemptions for small gambling winnings in Iowa?

No, there are no exemptions for small gambling winnings in Iowa. All gambling winnings are eligible to be taxed.

How do I report gambling winnings on my Iowa tax return?

You report gambling winnings on your Iowa tax return by adding your winnings to your IA 1040 form on line 63. Losses can be deducted, but you cannot deduct more than your reported winnings.

Are gambling losses deductible on my Iowa tax return?

Yes, gambling losses are deductible on your Iowa tax return if you are itemizing. Otherwise, you cannot claim them if you are taking the standard deduction.