Do you pay US tax on foreign lottery winnings? Tax on casino and gambling winnings in the US

US citizens and green card holders generally report worldwide gambling and lottery winnings on the US return, including prizes won abroad. Foreign nationals are generally taxed by the US only on US-source winnings, with a flat 30% rate applying to most casino and lottery payouts.

The scope here is casino games, state and foreign lotteries, online gambling, raffles, sweepstakes, and prizes. The forms, withholding, and refund paths differ depending on whether you're a US person abroad or a foreign national with a US win.

Both situations sit inside the wider US expat tax framework – for a full picture of how the US taxes citizens and green card holders abroad, see US expat taxes: the complete filing guide.

The actual bill in any year depends on the income mix, deductions, and any treaty position – how much tax US expats actually pay gives realistic numbers as a baseline.

Quick answer: Are lottery and gambling winnings taxable?

The US does tax lottery winnings paid to its citizens, green card holders, and resident aliens on worldwide income. Lottery winnings are taxed in the US at ordinary income rates – there is no separate gambling bracket.

For foreign nationals, US tax generally applies to US-source gambling winnings unless a treaty or a specific statutory exclusion applies. Nonbusiness blackjack, baccarat, craps, roulette, and big-6 wheel winnings are exempt; most other US-source gambling winnings are subject to the 30% withholding regime.

The table below summarizes the tax on winnings in the US by taxpayer type.

 

Withholding at the cashier is rarely the final number. For US persons, 24% on large prizes is a prepayment that gets reconciled against the year's full bracket. For foreign nationals, 30% may be reduced or refunded later via a 1040-NR or treaty claim.

Do US expats pay tax on overseas lottery winnings?

Yes. US citizens and green card holders are taxed on worldwide income, and lottery, casino, and other gambling winnings are ordinary income under that rule. A foreign country taxing the prize first doesn't remove the US obligation.

One point of confusion worth clearing up: the Foreign Earned Income Exclusion. The Foreign Earned Income Exclusion excludes up to $130,000 of foreign earned income for 2025, but it covers wages, salaries, and self-employment income only.

Lottery and gambling winnings are not earned income, so Form 2555 cannot shelter them. The worldwide-income rule that governs the reporting is set out in Publication 54, and the practical placement question is covered in our walkthrough of where to report foreign income on Form 1040.

Foreign tax withheld from the prize doesn't change whether you report the income – it changes how much US tax you pay after the Foreign Tax Credit. The mechanic is covered in two sections below.

How to report foreign lottery or casino winnings on a US tax return

Report the gross prize amount as "other income – gambling winnings" on Schedule 1, line 8b, and carry the total to Form 1040. The US tax on lottery winnings from a foreign source uses the same line and the same character of income as a domestic win – the difference is in the documentation.

For a US win, the casino or state lottery commission issues Form W-2G, which reports both the gross winnings and any federal withholding. For a foreign win, no W-2G is issued. Foreign payers don't file US forms, so the burden of substantiation sits with you.

Records to keep for a foreign gambling or lottery win:

• Date of the win
• Name of the casino, lottery, or platform and country
• Gross prize in the local currency
• USD amount using the exchange rate prevailing on the date received, with the rate source documented
• Foreign tax withheld at source, in local currency and USD
• Proof of payment (bank credit, casino disbursement, lottery payment slip)
• Treaty article or local law cited if the foreign country reduced its tax

Translate the prize into US dollars using the exchange rate prevailing when you receive it, unless another rate more properly reflects the income. For annuity payouts, apply the prevailing rate on each installment date.

The broader picture of which forms a US expat files alongside the 1040 is covered in our breakdown of US tax forms for expats.

Can expats claim a foreign tax credit on lottery winnings?

Yes, in many cases – but the credit isn't automatic. The Foreign Tax Credit can offset US tax on foreign lottery winnings when the foreign country has imposed a creditable income tax on the prize. It's claimed on Form 1116.

A "creditable foreign tax" is a foreign levy that functions like an income tax: imposed on you, paid by you, and not refundable by the foreign government. For Foreign Tax Credit purposes, only a foreign income tax, or a tax in lieu of an income tax, can qualify. Refundable levies and soak-up taxes do not.

How the credit interacts with your prize:

 

Foreign-source gambling winnings are generally reported in the general category on Form 1116 because they do not fall into the passive category or another separate limit category – which matters because credits in one category cannot offset US tax in another.

Scenario 1 – Germany. A US citizen living in Germany wins €50,000 in a German state lottery. The prize is still ordinary income for US purposes. If no foreign tax is imposed on the prize, there is no Foreign Tax Credit to claim on the US return – the full US tax applies at the taxpayer's marginal rate.

Scenario 2 – Spain. A US citizen in Spain wins a €80,000 state lottery prize. Under current Spanish Tax Agency guidance, lottery prizes above €40,000 are taxed at 20% on the excess amount, so €8,000 is withheld at source. On the US return, the full €80,000 USD-equivalent is reported, and €8,000 is claimed on Form 1116, limited to the US tax on the Spanish-source portion.

These are illustrative. Treaty positions, sourcing nuances, and local residency rules all affect the result, and picking between the credit and the exclusion is a separate analysis. The limitation calculation itself is walked through in Publication 514.

Can gambling losses reduce US tax?

Yes, but only under strict conditions. Gambling losses are deductible only if you itemize on Schedule A, and only up to the amount of gambling winnings you reported. Losses never produce a net loss against other income, and they don't reduce US tax on casino winnings dollar-for-dollar.

A material change applies for tax years beginning in 2026. Under the One Big Beautiful Bill Act (OBBBA), §165(d) now caps the deduction at 90% of allowable wagering losses. In practice: with $100,000 in winnings and $100,000 in losses in 2026, you can deduct $90,000 – leaving $10,000 of taxable winnings even though the cash math is break-even.

The broader OBBBA gambling rewrite, including changes for professional gamblers, is unpacked in our analysis of major gambling tax changes under the OBBBA. For tax year 2025, the prior dollar-for-dollar rule still applies.

Records you need to deduct gambling losses:

• A contemporaneous log: date and type of wager, name and address of the establishment, names of others present, amounts won and lost on each session
• Player's card statements from each casino
• W-2G forms received during the year
• Bank statements or wire receipts showing buy-ins and cash-outs
• For lottery losses: dated unredeemed tickets, purchase records, or lottery account statements
• For online play: platform transaction history exported by session

Professional gamblers follow different rules – wagering losses (and, beginning 2026, wagering-related expenses) are deductible on Schedule C against gambling income only, with the 90% limit also applying.

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Do foreigners pay US tax on lottery winnings?

Yes. Nonresident aliens are taxed at a flat 30% on most US-source gambling winnings under §1441, and the casino or state lottery commission typically withholds the full amount at the cashier.

"Nonresident alien" is the IRS term for a foreign national who isn't a US citizen, isn't a green card holder, and doesn't meet the substantial presence test. In plain English: a visitor, tourist, business traveler, or short-term worker who isn't a US tax resident.

The 30% is gross-basis: losses generally cannot be netted against US-source gambling winnings on a 1040-NR. One major exception applies – Canadian residents can deduct losses against winnings under Article XXII(3) of the US–Canada tax treaty. The IRS instructions expressly allow US-source gambling loss netting for Canadian residents; other treaty benefits should be confirmed against the specific treaty text.

Form 1042-S is the document the casino or lottery issues to report the gross winnings and tax withheld – full field-by-field guidance is in the instructions. Recipients receive a copy by mid-March of the following year and use it when filing Form 1040-NR to claim any refund.

Residency classification, withholding rules, and treaty positions are covered in Publication 519.

Federal tax rate on US lottery winnings

There is no separate "lottery bracket" for US persons. Winnings are ordinary income taxed at your marginal rate – which tops out at 37% for tax year 2025 – and the cashier's 24% federal withholding is a prepayment, not the final number.

The US tax on lottery winnings ultimately depends on your total annual income. A retiree adding a $50,000 prize to $30,000 of pension income lands in a lower bracket than a high-earner adding the same prize to $400,000 of wages.

Withholding thresholds at the payer level:

 

For nonresident aliens, the 30% is generally both the withholding and the final US tax – unless a game-specific exclusion or treaty reduces it, both covered below. The payer-side rules are set out in the Form W-2G instructions.

Which US casino winnings may be exempt for nonresident aliens?

Most US-source casino winnings paid to nonresident aliens are subject to the 30% federal tax. The carve-out is narrow but important: nonbusiness gambling winnings from blackjack, baccarat, craps, roulette, and the big-6 wheel are not subject to US income tax or 30% withholding under §871(j).

"Nonbusiness" means you aren't engaged in gambling as a trade or business. A professional poker player on tour, for example, would not qualify for the exclusion.

 

The split explains why the US tax on casino winnings depends so heavily on the game. A British visitor who wins $50,000 at the blackjack table walks away with the full amount. The same visitor winning $50,000 on a slot machine has $15,000 withheld at the cage and may need to file a 1040-NR to recover any of it.

The withholding mechanics for each category are set out in Publication 515, and the exempt games appear in the IRS list of amounts not subject to reporting on Form 1042-S.

Documentation note: if a casino issues a 1042-S in error – withholding on a game that should have been exempt – the correction path runs through a 1040-NR refund claim, not through the casino once the form has been issued.

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How to get tax back from US casino winnings

If 30% was withheld on US-source gambling winnings and you believe too much tax was taken – because the game was exempt under §871(j), because a treaty reduces the rate, or because the withholding was simply incorrect – the refund is recovered on Form 1040-NR for the year of the win.

The refund window is generally three years from the original due date of the return (or two years from when the tax was paid, whichever is later). A 30% withholding on a January 2025 jackpot is recoverable by filing a 2025 Form 1040-NR up to April 15, 2029.

What you need to file the refund claim:

1. The original Form 1042-S issued by the casino or lottery commission.
2. An ITIN, if you don't already have one. ITINs are tax-only ID numbers for individuals who can't get a Social Security Number, applied for on Form W-7 (which can be filed together with the 1040-NR).
3. A clear treaty position, where applicable – disclosed on the return and on Form 8833 when above the disclosure threshold.
4. Documentation of any losses you plan to net against winnings, if you're a Canadian resident claiming Article XXII(3) relief.

Scenario – Canadian slot win. A Canadian resident wins $20,000 on a US slot machine. The casino withholds $6,000 and issues Form 1042-S. Over the same visit, the player documented $14,000 in losses across other US gambling sessions.

Under Article XXII(3) of the US–Canada treaty, net winnings of $6,000 are taxable in the US. On Form 1040-NR, the player reports the $20,000 in gross winnings, claims the treaty-allowed loss deduction of $14,000, and computes US tax on the $6,000 net – producing a partial refund of the original withholding.

An ITIN is usually needed for an individual refund claim; if you do not already have one, file Form W-7 with the return and allow about 7 weeks, or 9–11 weeks in peak season or from abroad, for processing.

The eligibility analysis can also be checked against the IRS interactive tool on nonresident gambling winnings.

Our 1040-NR preparation service handles the ITIN application, treaty disclosure, and return in one engagement.

Do tax treaties reduce US tax on gambling winnings?

Yes, in some cases – but the relief is treaty-specific, and most US tax treaties do not include a gambling article at all. Where a treaty does reduce the tax on winnings in the US, the relief is generally claimed on Form 1040-NR after the fact, not at the cashier in real time.

Treaty relief is usually claimed on the US return, and Form 8833 may be required unless an exception applies; a payer will reduce withholding only when treaty rules and its own procedures allow it. Most foreign winners pay 30% at the cage and reclaim the difference by filing a 1040-NR.

Three patterns to know:

 

Form 8833 is required when the treaty position exceeds the disclosure threshold (generally $10,000 of treaty-affected items for individuals, with some exceptions). Filing without it can lead to a separate penalty even when the position itself is correct.

The current list of US tax treaties and the articles each contains is on the IRS tax treaties page, and the article-by-article guidance for individuals is in Publication 901.

A practical note: this article doesn't list specific treaty countries with gambling relief because treaty provisions change. The IRS treaty table is the authoritative source for the current text of each article.

State tax on US lottery and casino winnings

Federal tax is only part of the picture. US lottery winnings tax rules at the state level vary widely – check both the state where the win occurred and the state where you live.

• State income tax treatment. California does not tax California Lottery winnings but does tax most other gambling winnings. For other states, check the relevant state tax authority, as rates and exemptions differ.
• Nonresident state returns. If you live in State A and win in State B, State B may require a nonresident return on the winnings sourced to it. State A then typically credits the State B tax against its own.

State rules also distinguish between game types. State lotteries are administered by a state lottery commission that may withhold automatically at large prize levels. Casino winnings follow the state's general income tax. Sports betting and online poker are increasingly regulated state-by-state with their own withholding regimes.

For a US person abroad with a US-source win, two state questions usually run in parallel: whether the state of the wager wants a nonresident return, and whether the former home state still claims them as a resident.

Common mistakes with foreign lottery and US casino winnings

The same errors recur in our casework, and most are about documentation rather than complexity. The list below covers what we see most often on tax on winnings in the US returns and on foreign-prize reporting.

• Assuming foreign winnings are tax-free in the US. If the foreign country didn't tax the prize, the income is still fully taxable on the US return.
• Trying to shelter gambling winnings with the FEIE. Form 2555 covers earned income only. Gambling winnings are not earned income, no matter how active the play.
• Ignoring foreign tax withheld. If the foreign country imposed a creditable income tax, that tax is recoverable on Form 1116 – but only if it's reported. Missing the credit is leaving money on the table.
• Not reporting because no W-2G was issued. Foreign payers don't issue W-2Gs, and small US wins below the threshold also don't generate one. The reporting obligation doesn't depend on receiving a form.
• Treating 24% withholding as the final tax. For US persons, actual tax owed depends on the full-year bracket, not the cashier's rate. Some clients owe more; some are owed a refund.
• Missing the state return. A US-source win can trigger a nonresident state return even when the federal piece is handled cleanly.
• Claiming a treaty position without Form 8833. When the position exceeds the disclosure threshold, the penalty for skipping disclosure applies even if the treaty position itself is correct.
• Losing the 1042-S or W-2G. Replacements are obtainable, but waiting until April to discover the original is missing usually means a delayed refund.
• Mishandling currency on a foreign prize. Year-end exchange rates or rough estimates instead of the rate prevailing on the date the prize was received produce an incorrect USD basis – and an incorrect FTC calculation.

Documents to keep before filing

The checklist below covers what an expat with foreign winnings, a US person with domestic winnings, and a foreign national with a US win each need before filing. Not every row applies to every reader – the third column flags who needs which.

 

Retention: keep records for at least three years from the date the return is filed. For Foreign Tax Credit substantiation, the IRS refund window is 10 years from the original due date – keep the foreign-tax documentation that long.

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