Az Gambling Tax
For what has seemingly been the entire history of the United States of America, its citizens have had a love affair with gambling. Whether this is a direct result of the legal ambiguity surrounding the hobby or the regulations came into play because the act was so popular is certainly up for debate, but the fact remains that even a responsibly enjoyed gambling hobby lives in a legal gray area all throughout the country. We discuss specifics of Arizona gambling laws to clear up this grey area.
However, “amusement gambling” is still allowed. 1980: The State Lottery is approved, which over the years brings in millions of dollars in tax revenue for the state. 1988: The Indian Gaming Regulatory Act is passed, allowing tribes across the country and in Arizona to operate casinos on their land. Use this adjustment if Arizona Form 165 Schedule K-1, line 3, shows a difference between federal and state distributable income. Net Capital Gain Derived from Exchange of Legal Tender Include the amount of any net capital gain included in Arizona gross income that is derived from the exchange of one type of legal tender to another. Your gambling winnings are generally subject to a flat 24% tax. However, for the following sources listed below, gambling winnings over $5,000 will be subject to income tax withholding: Any sweepstakes, lottery, or wagering pool (this can include payments made to the winner (s) of poker tournaments). AZTaxes.gov allows electronic filing and payment of Transaction Privilege Tax (TPT), use taxes, and withholding taxes.
Federal laws that govern the entire country are clear on the subject. When organized crime and racketeering was rampant, laws were passed that restricted the facilitation of many gambling games while leaving mere participants well enough alone. From there, many individual states in the union took it upon themselves to further restrict and regulate gambling acts. The state of Arizona was one such state, and therefore its residents have to pay closer attention to the Arizona gambling laws more than those in other states.
With that in mind, ArizonaGamblingLaws was created with the aim to help guide Arizona residents through the rocky terrain of their legal landscape concerning gambling as well as to help steer them towards means that will allow them to enjoy an exciting hobby gambling responsibly as safely as possible. Gambling can be both fun as well as potentially profitable, and there is no reason anyone interested in participating should have to miss out.
Legality of Gambling in Arizona: Can You Get In Trouble?
Whereas federal law sees fit to merely regulate the facilitation of gambling, Arizona gambling laws take this principle one step further and goes so far as to define and even criminalize the act of unregulated gambling within its borders. Section 13-3301, heading four defines gambling as “risking or giving something of value for the opportunity to obtain a benefit from a game or contest of chance or skill or a future contingent event.”
First, the bad news. This is, unfortunately, an all-encompassing definition that eliminates all of the popular forms of gambling with unregulated vendors. Even worse, later on in the legislative document, there is even a punishment outlined for the act of placing any bets or wagers in relation to what the law has already defined as “gambling.” In Arizona, unregulated gambling is defined as a class 1 misdemeanor, which generally carries a $2,500 fine and up to six months in jail.
Now for the good news. If an Arizona resident is interested in merely participating in gambling, they will generally be safe from prosecution. In fact, at no point in the history of the state or their legislation has an otherwise honest citizen ever been brought up on charges for merely betting or wagering. This penalty has only been used to add charges up on already established criminals. Just so long as an Arizona resident is not brought in as any sort of a professional criminal, they should remain safe from the arm of the law.
However, this is not to say that all gambling related offenders would be safe in the state of Arizona. In fact, if one is found guilty of “promoting gambling” as defined in chapter 13-3303 in the document is a class 5 felony in the state which can be met with over two years in a state prison. Arizona residents should take extreme care to avoid this act.
Facilitation of Gambling For Profit vs. For Entertainment
Happily, there is a huge difference between these two actions even though they are only separated by one simple word.
The definition of gambling is simple and has already been outlined. Gambling is when one participates in any game or speculation involving a bet or wager. In Arizona, this encompasses betting on sports, betting on any casino table games of chance such as blackjack or roulette, or even wagering on hands of poker.
In order to do this, one will have to find a party willing to take their bet, operate their casino game, or host their poker game. This person would be fulfilling most of the requirements of “promoting” gambling already. The last distinction to make between the two acts is that the party who is hosting the game or taking the bet must also be making a profit off of the gambling activity.
To be clear, making a profit off of the gambling activity does not mean wagering and winning in a playing field where the odds are even. For example, if an Arizona resident is hosting a social poker game in their home and they win a few hands, they are not automatically guilty of “promoting” gambling. Making a profit means that the host of the game is in a position to profit off of gambling even without betting or wagering.
Examples of this include operating any casino game as the “house” (by definition in all table games, the house always has the best odds to win,) operating or maintaining a sportsbook where the offender takes bets from all players and assumes the responsibility of paying out winners, or operating a poker game in which admission is charged for the privilege to play or a “rake” (a small percentage of each hand collected by the house as profit) is collected from the table.
With these parameters clearly established, it would be highly unlikely any Arizona resident could find themselves inadvertently promoting gambling. Taking this into consideration along with the fact that the mere act of gambling is rarely if ever prosecuted and it should be easy to avoid any legal attention via a responsible gambling hobby.
Gambling Laws + Statutes That Affect Arizona Residents
Back in 1992, the Professional and Amateur Sports Protection Act was passed through federal courts. This banned the facilitation of all sports betting, but exempted four states. Unfortunately, Arizona was not one of them. Therefore, there are no leally operating sports betting rings found on land within the state of Arizona, but it’s worth noting that long time senator John McCain is a big proponent of legalizing sports betting on a federal level.
In the meantime, since the laws against sports betting are not heavily enforced in Arizona, thousands of residents are able to enjoy their hobby through the use of legal online sportsbooks that are maintained overseas and carry no legal risks.
Az Gambling Taxes
According to Arizona gambling laws, the state will not budge in its position against all forms of gambling, including casino games. However, there are several legal casinos within Arizona that are exempt under the Indian Gaming Act. Arizona residents are free to visit these facilities and gamble within their premises, with the understanding that they won’t exactly be standing in the most glamorous halls and lobbies of all time.
Meanwhile, due to the relaxed state of gambling enforcement of the state of Arizona, anyone is free to join the thousands or Arizona residents who already gamble with legal online casinos while running no substantial legal risk.
Due to the extreme popularity of poker and the profitability of state sanctioned poker rooms, many states make an exception for the game of poker by classifying it as a game of skill rather than chance. Arizona is not such a state, and therefore there are no state sanctioned poker rooms.
However, the eyes of the law do not reach into the private homes of Arizona residents. In addition to legal online poker rooms (which while gambling with is technically illegal, is not enforced) the law provides exceptions for social poker games, which is usually the most popular option for playing poker. Granted, residents may not take much money home since high stakes poker games rank among the best way to lose friends, but it’s good to know that Friday night cards and beers are a sacred thing in Arizona.
Arizona Gambling Age: How Old Do I need To Be To Play?
Az Gambling Tax Rates
If an Arizona resident reading this page takes one thing away from it, they should take that the legal situation for gambling in their home state is complicated at best. This being the case, they should not want to complicate matters any further by gambling underage.
The legal age to gamble in Arizona is 21, and we strongly recommend all residents wait until they are of that age to take part in gambling. Those found gambling underage will not only be banned from whichever facility they are using for gambling, but will face steep legal fines as well as potential jail time.
| General | Lottery | Casinos | Poker | Pari-Mutuel | Bingo |
|---|---|---|---|---|---|
| 21 | 21 | 21 | 21 | 21 | 18 |
Where to Legally Gamble in Arizona
On-Land: While the Arizona legislature does not allow state sanctioned gambling within their borders, there are a few options for Arizona residents who wish to gamble in a casino environment.
The state is home to several tribal casinos, all which offer slots, a variety of table games, and poker rooms for both sit and go tournaments and scheduled poker tourneys. While these facilities are a bit spread out for a state the size of Arizona, it could be well worthwhile for an afternoon away or a fun weekend of gambling. However, for residents who wish to gamble more regularly for shorter periods of time, they may not be the most practical option.
Online/Web-Based: While unregulated gambling in Arizona is something not permitted by the state, it is cannot be proven when using an operator outside the state located in another country. The need for this is a result of there being a distinct lack of options within the state. This has caused thousands to turn to legal online gambling networks to satisfy their needs.
Since these gambling websites are all established and maintained on foreign territories, they are exempt not only from Arizona gambling law, but from the federal laws that tend to crack down hard on facilities that offer gambling to regular citizens.
While the idea of gambling with a foreign entity may make some Arizona residents nervous, there is no need to fret. Since these gambling sites operate legally in their home country, they must be certified by international gaming commissions. This assures that not only will all of their members receive fair play, but that payouts from these sites will processed legitimately and quickly.
These are legitimate business that have been operating and catering to US clientele for over a decade. In that time they have earned pristine reputations, pages of positive customer testimony, and endorsements from major US media giants like ESPN, FOX, and CBS. These reputations are not earned easily or overnight, but through long years of providing excellent products paired with great customer service.
Best Legal Gambling Site For Arizona Residents
#1 Site For Casino Games, Poker & Sports/Horse Betting
When Arizona residents who are active in the gambling community think safe, legal online gambling, they think of Bovada. This is no mere coincidence or happy accident, this gambling website for Arizona residents has been hard at work providing the best possible sportsbook, poker rooms and digital casinos for over 20 years and in that time they have learned how to operate discretely and how to best serve the interest of clients from Arizona.
For instance, the Bovada gambling network was among the first to realize that Americans carry their most powerful computers around with them in their pocket. This led to the creation of the powerful Bovada mobile site that has yet to be topped in the industry. Now, Arizona residents can play poker, casino games, or bet on sports from anywhere in the world they have a phone signal with no need to interrupt their daily routine or glue themselves to a clunky laptop or desktop computer. Bovada truly has the best needs of the bettor at heart!
Other Recommended Arizona Betting Sites
Need More Help? time To Call In The Pros!
Although we are confident that all of the information on this page is in line with how things really are in relation to Arizona gambling laws, we here at ArizonaGamblingLaws.com admit that we are not lawyers, and have no formal legal training. While we are extremely experienced, we urge readers not to consider this as legal advice and to seek professional council if they are unsure about a particular type of gaming activity. The other option we present is checking the Arizona gambling statutes for yourself by clicking through to www.azleg.gov, which contains the exact language of the laws. It may take a little extra time to decipher the legal jargon, but it is time well spent if it helps you stay safe in your gambling endeavors.
Gambling and the Law®: By Professor I Nelson Rose
The Internal Revenue Code is unkind to winners -- and it doesn't much like losers, either. The federal government taxes gambling winnings at the highest rates allowed. So do the manystates and even cities that impose income taxes on their residents. If you make enough money, in a high-tax state like California or New York, the top tax bracket is about 50 percent. Out ofevery additional dollar you take in, through work or play, governments take 50 cents.
Of course, the tax-collector first has to find out that you have won. Congress and the Internal Revenue Service know gambling is an all-cash business and few winners indeed wouldvoluntarily report their good luck. So, statutes and regulations turn the gambling businesses, casinos, state lotteries, race tracks and even bingo halls, into agents for the IRS.
Big winners are reported to the IRS on a special Form W-2G. If winnings are to be split, as with a lottery pool, winners are reported on a Form 5754.
Pooling money to buy lottery tickets is common among employees and friends. But whether there are two or 200 in the pool, there is going to be only one winning ticket, and somebody has toturn it in. If you are that someone, make sure you fill out a Form 5754. If your share of a $5 million prize is $1 million, you do not want to be stuck with paying income tax on the entire $5million.
Gambling has become such big business that the IRS receives nearly four million Forms W-2G and 5754 each year. This tells the tax-collectors that nearly four million big winners are outthere, waiting to be taxed.
But the IRS does not always wait. The government wants to make sure it gets paid. What good does a W-2G do if the winner is a foreigner who is going to be in his own foreign country whenApril 15th rolls around?
So, the IRS not only wants reports filed, but often requires that a part of the winnings be withheld. As anyone who has a salary knows, withholding also allows the government to usetaxpayers' money for many months, without having to pay interest.
The withholding rate for nonresident aliens is 30%. Not coincidentally, the tax rate for nonresident aliens is also 30%. So, if a citizen of a foreign country wins $1 million cash at aslot machine in Las Vegas, he will find he is only paid $700,000. The remaining $300,000 is sent to the IRS. The foreign citizen is unlikely to ever file an income tax return, but the IRS getspaid in full anyway.
Citizens of foreign countries are also, of course, usually taxed by their own governments. So some countries have treaties with the U.S., which protects those foreigners from having topay the 30% withholding to the IRS.
U.S. citizens and resident aliens have it both better and worse than nonresident aliens. The withholding rate for gamblers living in American is only 28% (it was 20%, up to1992). Having the IRS take $28,000 out of a jackpot of $100,000 is painful. But, it can hurt even more when tax forms are filled out. There is no 30% maximum tax for people living in the U.S.,and really big winners often end up paying a lot more than 28% or 30%.
The one good news is Nevada casinos were also able to convince the IRS that they could not keep track of players at table games. They said that when a player cashes out for $7,000,they do not know whether he started with $25 or $25,000. So it is actually written into the law that there is no withholding or even reporting of big winnings to the IRS for blackjack,baccarat, craps, roulette or the big-6 wheel.
There is another general IRS rule that says anyone paying anyone else $600 in one year is supposed to file a report. The IRS has been going after casinos and cardrooms that runtournaments, forcing them to file tax reporting forms on grand prize winners. Here the IRS has the very good argument that the operator knows exactly how much a player has paid to enter thetournament and how much the finalists are given.
Is there anything a winning player can do to lower the bite of the income tax? And what about those who gamble and lose? Which is everybody, occasionally. The law does allow players totake gambling losses off their taxes, but only up to the amounts of their winnings.
Of course, if you win, say $135,000, you can take off all gambling losses, up to that amount. If you gambled away, say $65,000, you would only have to pay taxes on the remaining, let'ssee: $135,000 minus $65,000 equals $70,000. The tax on $70,000 is a lot less than the tax on $135,000.
Of course, you have the small problem of proving that you actually lost $65,000. Large winnings may be required to be reported to the IRS; large losses are not.
One former IRS Revenue Officer, who quit government to open his own small tax preparation firm, thought he found the answer. One of his clients won a share in a state lottery: $2.7million, paid out over 20 years in installments of about $135,000, before taxes. The winnings were reported, but the tax return claimed gambling losses of $65,000. The IRS decided that $65,000was a lot to lose, and it sent an agent to conduct an audit.
The tax preparer found a man with an extremely large collection of losing lottery tickets and made a deal: he would borrow 200,000 losing tickets for a month for $500. The losing ticketswere bound in stacks of 100 and shown to the IRS auditor: 45,000 instant scratch tickets, 5,000 other Massachusetts lottery tickets, and 16,000 losing tickets from racetracks throughout NewEngland. So many losing tickets, that it would have been physically impossible for one man to have made these bets. The New York Times called it, 'one of the more visibly inept efforts at taxfraud.' They pleaded guilty eight days after being indicted.
By the way, the man who rented the tickets was not charged. It's not a crime to collect losing lottery tickets, only to use them to try and cheat the IRS.