Paying state taxes on gambling winnings in another state

[BarbL]

Without knowing the states involved, the general rule is that some states will require you to claim the gambling winnings in the state where they were won. Most states tax all income earned in their state, regardless of your residency. In addition, your resident state will require you to report the winnings, but will offer a credit or deduction for the taxes already paid to a non-resident state.  Turbo Tax will handle all this for you.  

If you received a W-2G for your winnings, a copy was also sent to the state in which the money was won, so they will be expecting you to file a non-resident state return, if you meet their minimum requirement for filing.  Boxes 13-18 on your W-2G will indicate which state (and city) the winnings were reported to.

In the Personal Info section of Turbo Tax, you will indicate you made money in a state other than your resident state.  Later, when you enter state information from the W-2G (or winnings, if no W-2G was received), it will generate a non-resident state return, if one is required. 

The IRS and most states allow the deduction of gaming losses.  Be sure to include any losses on your tax return, as they can be used as an itemized deduction (if you itemize) to offset some of your winnings.

[easyedie]

I have a letter from the state of Illinois stating that taxes paid on gambling loses in another state are NOT available for a credit on taxes paid to another state.  So in the long run you are being double taxed.  my turbo tax  Illinois state program did not warn me of this situation and thus I was not hit with taxes but late fees etc.  The letter says they do not allow a credit for taxes paid on gambling winnings in another state.  I believe the program should let you know this.

[easyedie]

turbo tax Illinois state program is not correct when it comes to gambling winnings in another state.    Illinois does not give you credit for taxes paid on gambling in another state.

[Critter]

 IL is the ONLY state that DOES NOT allow you a credit for taxes paid to another state on gambling winnings. Their stance is that IL does not tax nonresidents for gambling winnings they win in IL and IF other state followed this same rule, they would not tax IL residence.. BUT we all know, OTHER states do not follow the same ruling as IL and THEY DO tax IL residents on winnings in their state. This means if you are an IL resident and you win money in another state, you WILL be DOUBLE taxed on that money. You will pay the state taxes to the state you won the money AND you WILL pay IL state taxes on that same money. Another reason to move out of IL. They are penalizing their own residents by double taxing them to make up for the taxes they are not collecting from nonresidents of IL coming to IL and winning money in their casinos!  I think it is time for IL to make a change and tax those nonresidents on their winnings they have in IL like EVERY OTHER state does instead of double taxing the heck out of their own residents!

If you believe the program completed the return incorrectly then put in an accuracy guarantee claim : 

Any calculation errors on the part of TurboTax are covered under the Accurate Calculation Guarantee.  TurboTax will pay any penalties and/or interest due to a calculation error but not any taxes owed.  The Guarantee does not cover any user entry errors or omissions.

See this TurboTax support FAQ for the 100% Accurate Calculation Guarantee - https://ttlc.intuit.com/questions/2566201-what-is-the-turbotax-100-accurate-calculation-guarantee

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[Klattekr]

I'm having an issue with my 2016 taxes. Originally turbo tax calculated that I owed Ohio approximately $8,000 because of my gambling winnings in Indiana. at the time I was unable to pay for a second state and open a Indiana return. after updating my software yesterday and going to amend my taxes now TurboTax says they don't think I need to file a Indiana return and that I owe Ohio 6000. I'm trying to figure out what I need to file because that's going to be paying two state taxes. Indiana took out state taxes at the casino. Am I correct that I should get a refund from Indiana of all the taxes paid that way that can be sent to Ohio? I just don't understand how on gambling winnings when I lost more than I won I would still l Ohio on all of the gambling.

[Hal_Al]

Q. Am I correct that I should get a refund from Indiana of all the taxes paid?

A. No. Ohio & Indiana have a reciprocal agreement on income, but it only applies to wages (if you live in OH and work in IN, you don't pay IN tax on your wages).  IN will tax gambling winnings of OH residents.

Q. Do I still owe Ohio on all of the gambling, when I lost more than I won?

A. Yes. Ohio does not allow any deduction for gambling losses.  Ohio will allow a credit for any tax paid to IN, on the same winnings

[Critter]

You need to file the IN return so you get a credit for any taxes paid to IN on the Ohio return. 

[grasshopper612]

I thought it was illegal for two states to tax the same income? Federal law prohibits two states to tax the same income so how can IL tax gambling income that has already been taxed by Indiana? 

[xmasbaby0]

@grasshopper612 This is a very old thread.   You have provided no details for us.   We do not know which state you live in and/or which state you gambled and won money in.   You have not told us whether you filed tax returns in each state or which return you prepared first.  

[grasshopper612]

I realize the post is old but its very difficult to find any information regarding this issue. Live and file in Illinois (rate is 4.95%). Have gambling winnings from Indiana (rate is 3.23%). Illinois does not allow a deduction for tax paid to another state for gambling (until 2020) So, I paid BOTH state’s tax on the same income. Double taxation. I'm wondering how that is legal? I thought the supreme court ruled it wasn't in 2015 (two states can't tax the same income). 

[grasshopper612]

And just to be clear. Illinois doesn't charge  the difference (since their tax rate is higher), that would be understandable. They charge the full rate with no deductions 

[grasshopper612]

Do you have a response to my question regarding the legality of double taxation? Please see my precious post where I provided you with the details you requested.

[tagteam]

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@grasshopper612 wrote:

Do you have a response to my question regarding the legality of double taxation? 

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Any prohibition against double taxation would be applicable to taxing income, gain, profits, et al, by the same taxing authority.

[grasshopper612]

Thank you for your response. But aren’t State department of revenues considered the SAME taxing authority even if they are different states?