• Written By
    Lindsey Crossmier

    Lindsey Crossmier

    Financial Writer

    Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers annuities, structured settlements and other personal finance topics for Annuity.org.

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  • Edited By
    Savannah Pittle
    Savannah Pittle, senior financial editor for Annuity.org

    Savannah Pittle

    Senior Financial Editor

    Savannah Pittle is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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  • Financially Reviewed By
    Janet Berry-Johnson, CPA
    Janet Berry-Johnson, CPA

    Janet Berry-Johnson, CPA

    Certified Public Accountant

    Janet Berry-Johnson is a certified public accountant and freelance writer with a background in accounting and income tax planning and preparation. Janet was named one of the Top 100 Must-Follow Tax Twitter Accounts for 2020 by Forbes.

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  • Updated: August 23, 2023
  • 5 min read time
  • This page features 4 Cited Research Articles
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How to Cite Annuity.org's Article

APA Crossmier, L. (2023, August 23). Casino Winnings & Annuity Payments. Annuity.org. Retrieved June 20, 2024, from https://dev.annuity.org/selling-payments/casino/

MLA Crossmier, Lindsey. "Casino Winnings & Annuity Payments." Annuity.org, 23 Aug 2023, https://dev.annuity.org/selling-payments/casino/.

Chicago Crossmier, Lindsey. "Casino Winnings & Annuity Payments." Annuity.org. Last modified August 23, 2023. https://dev.annuity.org/selling-payments/casino/.

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Key Takeaways

  • Casinos typically pay winnings of less than $25,000 by cash or check.
  • They may disburse larger winnings either as a lump sum or as an annuity.
  • Some casinos won’t allow you to choose how to receive winnings.
  • If you receive an annuity, you can convert it to a lump sum by selling it — but you won’t receive the full value of your winnings.

Receiving Your Casino Winnings

Winning big at the casino comes with tax implications and financial decisions, especially when choosing the best payout method for your financial needs. If the casino winnings are $25,000 or less, casinos usually limit payout options to cash or a check. If the winnings are larger than $25,000, you can typically choose between a lump sum or a stream of annuity payments. 

Your payout options may change depending on the casino’s location and gambling game. Not all casinos allow you to choose how your earnings are paid out; the casino may choose for you.

Illustration of a hand holding a bag of money labeled "Casino Winnings," next to the bag are arrows pointing to two payout options: Discounted Lump Sum and Annuity Payments.

While taking a single lump sum can be helpful for addressing major financial needs, such as tuition fees or urgent medical bills, receiving a lump-sum payment can also negatively influence spending and saving habits. Remember that lump-sum payments are subject to taxes as ordinary income, which can cut out a considerable amount of your earnings. 

Receiving casino winnings as annuity payments can help provide a controlled income stream over a longer period. These payments aren’t taxed until withdrawal, allowing the money to accumulate interest. Yet, this option restricts immediate access to a large portion of your winnings, which might pose a challenge during financial emergencies.

Pro Tip

Winners of large jackpots typically have up to 90 days to decide if they prefer a lump sum or an annuity.

Source: Casino USA 

If you receive winnings in an annuity, you may still be able to sell all or a part of your annuity on the secondary market for a lump sum later. That lump sum will be less than what you would have originally received in annuity payments because secondary market buyers purchase at a discount rate.

If given a choice of payout options, it may be wise to consult with a financial advisor or tax attorney to help determine the best decision.

Tax Implications of Different Payout Options

All gambling winnings — specifically those from lottery payouts, poker tournaments, horse races and slot machines — are taxable at the federal level. This means your casino earnings can place you in a higher tax bracket. 

While a lump sum provides a bulk of cash all at once, winners must pay taxes on the entire sum within the same year it’s distributed. However, the taxes are paid only once. This option may work best for those looking to pay off debt or address other immediate financial needs.

Claiming an annuity from a casino means committing your winnings to a long-term payment plan that can take 20 to 30 years to fully payout. This guarantees an additional income stream over time — it also guarantees extended income tax liability on those earnings when you receive them. 

The IRS handles federal taxes on gambling winnings. For certain games with larger winnings, payers will furnish winners with an IRS Form W-2G.

No matter the amount, all winnings must be reported on the next tax return. A winner will generally only receive a Form W-2G if the earnings meet certain thresholds:

  • $600 or more in gambling winnings, except winnings from bingo, keno, slot machines and poker tournaments (if the amount is at least 300 times your bet)
  • $1,200 or more from a slot machine or bingo game
  • $1,500 or more in keno winnings
  • $5,000 or more in a poker tournament
  • Any winnings subject to a federal income tax withholding requirement

Source: IRS

Under specified conditions, including when winnings minus the wager exceed $5,000 and the winnings are at least 300 times the wager, the IRS requires the payer to withhold 24% of winnings before paying the final amount.

Some winnings may also be taxable at the state level. Each state has its own set of regulations for gambling taxes, so researching local requirements before filing your next tax return is important. 

Lump Sum vs. Annuity Payments for Casino Winnings

Opting for a lump sum from the casino means accepting a discounted rate, usually around 50% to 60% of the total winnings. To put this into perspective, a $1.55 billion jackpot winner selecting the lump-sum option might only receive approximately $757.2 million, as reported by Kiplinger

Consider the pros and cons of both payout methods to determine which option better suits your needs and future plans. 

Pros and Cons 

Lump Sum

Pros

  • Immediate access to a large amount
  • Useful for urgent financial needs
  • Taxes are paid only once

Cons

  • Comes at a significant discount
  • Can place you in a higher tax bracket
  • Can negatively influence saving and spending habits

Annuity Payments 

Pros

  • Provide a long-term stream of income
  • Potential to avoid immediately moving to a higher tax bracket
  • Generally lead to a larger overall payout
  • You can sell remaining payments for a lump sum later if you change your mind

Cons

  • Less liquidity
  • Taxes are paid on each withdrawal
  •  Inflation can reduce the buying power of your future payments

Frequently Asked Questions About Casino Winnings & Annuity Payments

Are casino winnings taxed differently for a lump sum versus an annuity?

Casino winnings are fully taxable and can bump you into a higher tax bracket. How much you win determines how you’re taxed. The casino will take 24% of larger winnings for the IRS before paying you your lump sum. Taking winnings as an annuity over 20 or 30 years may reduce your tax burden and keep you in a lower tax bracket. 

Do you have to report all of your casino winnings to the IRS?

You are legally required to report all casino winnings to the IRS via Form 1040. If you earn above a certain threshold, you may also receive a Form W-2G. Even without this form, all winnings need to be reported. 

Who are good candidates for taking an annuity for casino winnings?

Those seeking a consistent income stream over several years and aiming to maximize their total payout might find an annuity the more fitting option.

Editor Malori Malone contributed to this article.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: August 23, 2023

4 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Washington, K. (2023, August 4). Retrieved from https://www.kiplinger.com/taxes/602142/tax-on-mega-millions-jackpot
  2. Internal Revenue Service. (2023, April 4). Topic No. 419, Gambling Income and Losses. Retrieved from https://www.irs.gov/taxtopics/tc419
  3. Ivanovic, M. (2022, August 3). How Do Casinos Pay Large Jackpots? Retrieved from https://www.casinousa.com/blog/how-do-casinos-pay-large-jackpots
  4. Internal Revenue Service (2021, February 18). Instructions for Forms W-2G and 5754. Retrieved from https://www.irs.gov/pub/irs-pdf/iw2g.pdf