Now that all four new casinos in Ohio are open for business, gamblers there may not know some of the tax implications they will have to deal with. It is a good news/bad news situation. The good news is that as of January 1, 2013, Ohio residents got a new state tax break they could not enjoy in the past, that is they can now deduct gambling losses from gambling wins just like they can do on their federal return. [That good news didn't last long – they repealed this law and made it retroactive to January 1 – no deductions for state tax returns!]
However, the bad news is that all four cities with casinos have levied a city tax that is definitely not gambler-friendly. On those city returns, going contrary to the new state rule, you can not deduct your losses from your wins, thus paying city tax on the total gross amount of wins. [Now city and state are on the same sad page.]
I have had a hard time finding complete and accurate information on the tax withholding situation in Ohio casinos and whether the city tax is withheld for both city residents and non-residents. Here is the list with the city tax rates and preliminary information on the withholding. I will revise and post here if I find out anything is different. [Is all of this still correct?]
Columbus: 2.5% applies to both residents and non-residents
Cleveland: 2% applies only to residents
Cincinnati: 2.1% applies to both residents and non-residents
Toledo: 2.25% applies to both residents and non-residents, with a $2500 exemption that is claimed by filing a Toledo City tax return.
All casinos must withhold 4% from all W-2G jackpots for state taxes, whether you are a resident of Ohio or not. If you are not a resident of that state, you usually will have to file a non-resident state return to get back some or all of the tax withheld. This depends on your state of residency; some border states may have reciprocal agreements that let you count that as a credit on your own state return. This is the same situation for non-residents who want to get back the withheld city taxes. In many cases, gamblers might decide to "eat" this loss and avoid the additional paperwork. And if they pay someone to do their taxes, the fees for filing extra returns might be more that the tax recouped!
Another confusing situation, some (or all?) of the W-2Gs given out in Ohio do not have a special box on the form for local taxes withheld and so they combine the state tax and city tax withheld and put that figure in the "State Tax" box. I've had reports that some casinos give you a separate "note," breaking down the tax information, or they add that information at the bottom of the W-2G form. Hopefully the casinos will get updated W-2G forms soon so gamblers will know exactly what taxes are being withheld. [Has that happened?]
As I have always stressed, what paperwork you get – or don't get – has no bearing on what gambling income you have to report on your income tax returns. You are required to report ALL gross gambling income and then you can list all losses as deductions if/when that is allowed. This often is a big problem for recreational gamblers. Only professional gamblers who file as a business can net out their wins. If you need more information about this subject, my book Tax Help for Gamblers discusses this in detail.
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I will appreciate any addition input or corrections.
Jean $¢ott, Frugal Gambler
http://queenofcomps.com/
You can read my blog at
http://jscott.lvablog.com/
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