For example, if someone won 25,000 and 25% tax was withheld (W2G) prior to payment; when filing your tax return and entering the winnings as other income could this change your tax bracket i.e. tax rate?
you will only pay the higher rate on the higher earnings.
So, if your higher earnings are in the form of casino wins, your usual tax rate is not increasing.
Ok, just to clarify. Let's say that your yearly income puts you in the 15% tax bracket after AGI. When you go to file, adding the winnings as other income, and creating a new AGI (yearly income + winnings - deductions) puts you in the 25% tax bracket, would this then become your new bracket?
And if so wouldn't this effectively be taxing the winnings twice since taxes were already withheld when the winnings were claimed?
No.You are not taxed twice, as TT gives you credit for the taxes withheld (just like with your paycheck).
Yes. See https://taxfoundation.org/2017-tax-brackets/
Taxable income is gross income minus exemptions and deductions
Ok, just to clarify. Let's say that your yearly income puts you in the 15% tax bracket after AGI. When you go to file, adding the winnings as other income, and creating a new AGI (yearly income + winnings - deductions) puts you in the 25% tax bracket, would this then become your new bracket?
And if so wouldn't this effectively be taxing the winnings twice since taxes were already withheld when the winnings were claimed?
No. The tax you paid was just withholding like from your paychecks. You get credit for it on your return with all your other withholding on 1040 line 64..
Yes, 25% becomes your new tax bracket. But your tax bracket is only your MARGINAL tax rate. That is, only an additional $ of income is taxed at 25%. In the example you gave ("yearly income puts you in the 15% tax bracket after AGI) your regular income will only be taxed at 15% (some will actually only be taxed at 10%). Some of he gambling winnings will be taxed at 15% and some at 25%. Bottom line for you (if the example fits you) is that you will be getting back some of that 25% withheld on the winnings.