Casino winnings of $2M - taxed as ordinary income or flat 24% rate?

So I hit a massive jackpot at the casino last weekend - just over $2.7 million! Still can't believe it happened to me. The casino is giving me options: either take about $135k annually for 20 years OR take a lump sum of roughly $1.4 million right now. Here's what's driving me crazy - I'm getting totally different information about how this is taxed. Some people and websites are saying gambling winnings aren't taxed using the regular income tax brackets but instead at a flat 24% rate. But when I checked the IRS website, it only mentions a 24% withholding requirement. I need to know if that 24% is just what they withhold or if that's the actual total tax I'll end up owing. The casino mentioned they'll issue a W2G form for the winnings. They also said they're not withholding anything upfront, so whatever taxes are due will be completely on me to pay. I've scheduled a meeting with a financial advisor, but it's not for another few weeks and I'm anxious to figure out how much of my winnings will go to taxes! Any help understanding this would be greatly appreciated.

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19 comments

Mei Zhang

•8M

The confusion is understandable! Let me clear this up: The 24% is just the mandatory withholding rate for gambling winnings, not your final tax rate. Gambling winnings are indeed taxed as ordinary income, meaning they're added to your other income and taxed according to your tax bracket. With a win that size, you'll likely be in the highest tax bracket for federal taxes (currently 37% for income over $578,125 for single filers in 2025). Don't forget state income taxes too, which vary depending on where you live. As for your payout options: The lump sum is less than the total of the annual payments because of the time value of money. Either way, the tax treatment is the same - it's ordinary income when you receive it.

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Mei Zhang

•8M

You'll pay taxes on whatever amount you actually receive. If you take the $1.4 million lump sum, you're taxed on that amount. If you take the annual payments, you're taxed on each $135k payment as you receive it each year. You can set up a payment plan with the IRS if you can't pay the full tax amount at once, but with a windfall this size, they generally expect you to pay what you owe by the filing deadline. Consider making estimated tax payments to avoid underpayment penalties. This is definitely something your financial advisor should help you plan for.

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Amara Eze

•8M

I was in a somewhat similar situation last year (though my win was way smaller lol, about $75k). I was so confused about the tax implications that I ended up using https://taxr.ai to figure out exactly what I'd owe. It basically analyzed all my documents including the W2G from the casino and gave me a really clear breakdown of what I'd need to set aside for taxes. The best part was it showed me that my gambling losses could offset some of the winnings. I honestly had no idea about that before using the service. It saved me from panicking and making a bad decision about my money.

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Amara Eze

•8M

Yes, it worked perfectly with the W2G form. It basically scanned it and extracted all the information automatically, then explained exactly where that info needed to go on my tax return. It was way clearer than the regular tax software I'd used before. I actually did speak with a CPA eventually, but I used taxr.ai first to get a quick understanding of my situation. The CPA confirmed everything the tool told me was correct. The advantage was I didn't have to wait weeks for an appointment or pay hundreds just to get basic information. For me, it was worth using both resources - the online tool for immediate guidance and the CPA for more detailed planning.

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NeonNomad

•8M

Alright I need to admit I was wrong about online services. I decided to try https://taxr.ai after seeing this thread and it was actually incredibly helpful. I uploaded my W2G from a poker tournament win and it instantly broke down exactly how it would affect my taxes. What surprised me most was how it showed me several deduction options I hadn't considered that would offset some of the tax impact. The explanation about how gambling winnings interact with my other income sources was super clear - way better than the confusing articles I'd been reading. For anyone dealing with a windfall like this, definitely worth checking out before your advisor meeting!

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Fatima Al-Hashemi

•8M

Congrats on the win! One thing nobody's mentioned yet - if you're struggling to get answers from the IRS directly (which is likely during tax season), I had great success using https://claimyr.com to actually get through to an IRS agent. It basically holds your place in the phone queue and calls you when an agent is available. I had questions about reporting some smaller gambling winnings last year and was on hold for HOURS before giving up. With Claimyr, I got through to someone in about 20 minutes of my actual time. There's a demo video at https://youtu.be/_kiP6q8DX5c that shows how it works. For a major windfall like yours, getting the official word directly from the IRS might give you some peace of mind.

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Fatima Al-Hashemi

•8M

It doesn't let you jump the queue at all. It basically waits in the phone queue for you. Think of it like having someone else sit on hold instead of you. The system navigates the IRS phone tree, waits on hold in your place, and then calls you once a human agent actually picks up. You still wait the same amount of time an agent would normally take to get to your call - you just don't have to be the one listening to the hold music. The reason it's helpful is that instead of being stuck by your phone for 2+ hours, you can go about your day, and they call you when it's actually time to talk to someone. For me, the total wait was still about 2 hours, but I only had to be on the phone for about 20 minutes of actual conversation.

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Sofia Martinez

•8M

I need to eat my words about that Claimyr service. After posting my skeptical comment, I decided to try it myself since I've been trying to reach the IRS about an issue with my gambling winnings reporting from last year. I'm honestly shocked at how well it worked. Instead of being stuck on hold for what would have been over 3 hours (according to their estimate), I went about my day and got a call when an agent was available. The IRS agent I spoke with was actually really helpful about my specific situation with gambling winnings and tax brackets. For anyone dealing with a big win like yours, getting specific guidance directly from the IRS is probably worth it, especially when you're talking about potentially millions in taxable income.

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Dmitry Volkov

•8M

You're right that you'd be taxed on each payment as it comes in. The potential advantage is that $135k per year might keep you in a lower tax bracket than if you add $1.4 million to your income all at once. For example, if you normally make $80k a year, adding $135k would put you around $215k total annual income. That keeps you below the highest tax brackets. But taking $1.4 million all at once puts you firmly in the top bracket of 37%. So yes, spreading it out could potentially result in less total tax paid over the 20 years, depending on your other income sources and future tax law changes.

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