Yes, sweepstakes casino winnings are taxable income. When you redeem Sweeps Coins (SC) for cash or prizes, the IRS treats those redemptions as prize income, not traditional gambling winnings.
This income is reported on Form 1040, Schedule 1 as “Other Income.” If your total Sweeps Coin redemptions exceed the reporting threshold in a calendar year, the sweepstakes platform will issue a Form 1099-MISC. Unlike regulated casinos, sweepstakes platforms do not issue the W-2G form.
You owe federal income tax on every dollar you redeem, regardless of whether you receive a tax form. This applies equally to Sweeps Coins earned through gameplay, promotional offers, or daily login bonuses, which many players mistakenly assume are exempt from taxation.
The same tax obligation applies to Sweeps Coins obtained via Alternative Method of Entry (AMOE) mail-in requests. Although these entries are free to obtain, their value becomes taxable once Sweeps Coins are redeemed for real-world value.
Tax liability is triggered at the moment Sweeps Coins are converted into cash or gift cards. If you’re unfamiliar with how this process works in practice, our full breakdown on how Sweeps Coin redemptions work explains the mechanics step by step.
The distinction between Form 1099-MISC and Form W-2G is just one of many ways sweepstakes casino taxes differ from traditional gambling taxes. The rules around deducting losses are significantly murkier, reporting thresholds changed in 2026, and many players don’t even realize they have a tax obligation until filing season arrives.
This guide covers everything you need to know — from core federal tax rules to the brand-new 2026 tax law changes, platform-specific reporting practices, and state-by-state obligations. Whether you redeemed $50 or $50,000 last year, you’ll know exactly what to report and how.
How Sweepstakes Casino Taxes Differ From Traditional Gambling Taxes
If you’ve ever played at a regulated online casino, it’s natural to assume the same tax rules apply to sweepstakes platforms. In practice, that assumption is incorrect.
The IRS classifies sweepstakes casino payouts differently from traditional gambling winnings, and that distinction affects which tax forms you receive, how your income is reported, and whether losses can be deducted.
The core difference comes down to how the law views sweepstakes casinos. Because players can always obtain Sweeps Coins through free methods — including daily logins, promotional giveaways, and mail-in entries — the IRS generally treats Sweeps Coin redemptions as prize winnings rather than wagering income.
| Tax Element | Sweepstakes Casino | Traditional / Online Casino |
|---|---|---|
| IRS classification | Prize income | Gambling income |
| Tax form issued | Form 1099-MISC | Form W-2G |
| Reporting threshold (2025) | $600 cumulative per year | Varies by game type ($600–$5,000) |
| Reporting threshold (2026+) | $2,000 cumulative per year | $2,000 (W-2G) |
| Reported on your return as | Other Income (Schedule 1, Line 8b) | Gambling Income (Schedule 1, Line 8b) |
| Loss deductions | Legally unclear — most experts advise against it | Yes, up to winnings (90% cap in 2026) |
| Automatic withholding trigger | $5,000+ (24% federal) | $5,000+ (24% federal) |
At a traditional casino, if you win $10,000 and lose $10,000 in the same year, you can typically deduct those losses to reduce your taxable gambling income. With sweepstakes casinos, most tax professionals advise that losses cannot be deducted because sweepstakes play does not meet the IRS definition of a wager.
What Counts as Taxable (and What Doesn’t)
Understanding which transactions trigger a tax obligation is the single most important concept for sweepstakes casino players. The rule is straightforward: the taxable event is the redemption of Sweeps Coins for cash or prizes — not the moment you win them during gameplay.
Taxable Transactions
Every Sweeps Coin (SC) redemption is taxable. It does not matter whether those SC were earned through gameplay, promotional offers, or bonuses tied to Gold Coin purchases. Once SC are redeemed for real-world value, that value is income.
Players often misunderstand this point because SC can be obtained for free. However, the method of acquisition is irrelevant for tax purposes. A deeper explanation of how the two currencies function is available in our Gold Coins vs Sweeps Coins guide.
Common taxable scenarios that players frequently overlook include:
- Redeeming Sweeps Coins earned from daily login bonuses
- Redeeming Sweeps Coins received through AMOE (mail-in) entries, even though no purchase was required
- Redeeming Sweeps Coins from promotional giveaways, social media contests, or referral bonuses
- Redeeming Sweeps Coins that were included as part of a Gold Coin purchase bonus (for example: “Buy 10M GC, get 30 free SC”)
- Making multiple small redemptions over the course of a year that add up, even if no single redemption crossed a reporting threshold
Non-Taxable Transactions
Gold Coins (GC) are not taxable. Purchasing Gold Coins is not considered a deposit for tax purposes, and playing with Gold Coins does not create taxable income.
Gold Coins have no real-money value and cannot be redeemed for cash. From a tax perspective, buying Gold Coins is similar to purchasing a digital entertainment product, such as arcade tokens.
The following activities are not taxable:
- Purchasing Gold Coin packages (even when bonus SC are included)
- Winning or losing Gold Coins during gameplay
- Receiving Gold Coins from daily bonuses or promotions
- Accumulating Sweeps Coins in your account balance before redemption
- Transferring Sweeps Coins between games on the same platform
One additional nuance worth noting involves sales tax. Some states apply sales tax to Gold Coin purchases by classifying them as digital goods.
This sales tax is separate from income tax on Sweeps Coin redemptions. In certain states, players may effectively pay sales tax when purchasing Gold Coins and income tax later when redeeming SC — a quirk unique to sweepstakes casinos.
Tax Thresholds and Reporting Rules
Two concepts frequently get confused: the reporting threshold and the tax obligation. They sound similar, but they are not the same thing.
The Reporting Threshold: When You’ll Receive a 1099-MISC
For tax year 2025 (filed in early 2026), sweepstakes casinos were required to issue a Form 1099-MISC if your cumulative prize redemptions reached $600 or more during the calendar year.
For tax year 2026 and beyond (filed in early 2027), the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, raised this threshold to $2,000. Starting January 1, 2026, platforms will only issue a 1099-MISC once cumulative redemptions reach that amount.
Beginning in 2027, this reporting threshold will be adjusted annually for inflation.
The Tax Obligation: When You Owe Taxes
Here’s the part many players miss: you owe federal income tax on all sweepstakes winnings, regardless of whether you receive a Form 1099-MISC.
If you redeemed $400 in Sweeps Coins during 2025, no platform was required to send you a tax form — but the IRS still expects that $400 to be reported as income.
The same rule applies under the new $2,000 threshold. If you redeem $1,500 in 2026, you will not receive a 1099-MISC, but you are still legally required to report the full amount.
The Withholding Threshold: When Taxes Are Automatically Deducted
In certain situations, sweepstakes casinos may automatically withhold federal income tax from a redemption before paying it out. This typically occurs when a single prize redemption exceeds $5,000 (after subtracting the wager amount, if applicable).
When withholding applies, platforms deduct 24% federal tax and send that amount directly to the IRS on your behalf. The withheld tax is then credited against your total tax liability when you file your return.
If too much tax was withheld relative to what you actually owe, the excess is refunded as part of your tax return. If too little was withheld, you remain responsible for paying the difference.
Not all sweepstakes casinos apply automatic withholding consistently. Some platforms withhold on large redemptions, while others do not. Regardless of whether tax was withheld at payout, the tax obligation is always yours.
Do not assume that the absence of withholding means you owe nothing. Withholding affects timing and cash flow — not whether the income is taxable.
Quick Reference: 2025 vs. 2026 Thresholds
| Threshold Type | Tax Year 2025 | Tax Year 2026+ |
|---|---|---|
| 1099-MISC issued at | $600 | $2,000 (OBBBA change) |
| You must report income at | $1 (all winnings) | $1 (all winnings) |
| 24% auto-withholding at | $5,000 single prize | $5,000 single prize |
How to Report Sweepstakes Casino Winnings: Step-by-Step
If you redeemed any Sweeps Coins for cash during the year, follow the steps below to report your income correctly. The same process applies whether you are filing a 2025 return or planning ahead for your 2026 filing.
Step 1: Gather Your 1099-MISC Forms
If your cumulative redemptions exceeded the reporting threshold ($600 for 2025, $2,000 for 2026), each sweepstakes platform should issue a Form 1099-MISC by January 31 of the following year.
Review Box 3 (“Other income”) on each form, which shows the amount reported to the IRS.
Important: The company name listed on your 1099-MISC may not match the casino’s brand name. Many sweepstakes casinos operate under parent or holding companies.
For example, Chumba Casino redemptions may appear under “VGW Holdings,” while other platforms issue forms through entities such as “B2 Social” or similar processors. If you receive a 1099-MISC from an unfamiliar name, verify the EIN against the platform’s terms of service before assuming the form is incorrect.
Step 2: Calculate Your Total Redemptions Across All Platforms
If you played on multiple sweepstakes casinos, add together your redemptions from all platforms. Each casino reports independently, but your tax return must reflect the combined total.
Be sure to include:
- All Sweeps Coin redemptions that generated a 1099-MISC
- Sweeps Coin redemptions below the reporting threshold
- The fair market value of non-cash prizes, such as gift cards or merchandise won through promotions
Step 3: Report on Form 1040, Schedule 1, Line 8b
Sweepstakes casino income is reported on Schedule 1 (Form 1040), Line 8b under “Other Income.” Enter your total sweepstakes redemptions for the year.
This amount flows through to your Form 1040 and is included in your adjusted gross income (AGI).
If you use tax software such as TurboTax, H&R Block, or FreeTaxUSA, look for the section labeled “other income” or “prizes and awards.” The software will place the amount on the correct line automatically.
Step 4: Determine Whether You Can Deduct Losses
This is the most complex and uncertain area of sweepstakes casino taxation. We explore the loss deduction debate in detail in the next section, but the short version is:
- Traditional gamblers may deduct losses up to the amount of their winnings on Schedule A (subject to a 90% cap beginning in 2026)
- Sweepstakes casino players likely cannot deduct losses, because sweepstakes play is not classified as a “wager”
- Gold Coin purchases are not deductible under any interpretation
If you have significant sweepstakes activity, consulting a qualified tax professional is strongly recommended.
Step 5: Account for State Taxes
After completing your federal return, determine whether your state taxes prize income. Most states with an income tax include sweepstakes winnings in taxable income.
We provide a detailed state-by-state reference later in this guide.
Finally, retain all records for at least three years from the date you file your return. The IRS may audit up to three years back, or up to six years if it suspects substantial underreporting.
Save screenshots of redemption histories, copies of all 1099-MISC forms, and records of Gold Coin purchases. Proper documentation is your best protection in the event of a tax inquiry.
Which Platforms Send Tax Forms?
Most sweepstakes casinos issue a Form 1099-MISC when your cumulative Sweeps Coin (SC) redemptions reach the federal reporting threshold. However, many players are surprised when the company name on the form does not match the casino’s brand.
This is normal. Many sweepstakes casinos operate under parent companies, holding entities, or third-party processors. The table below lists popular platforms alongside the legal entities most commonly shown on issued 1099-MISC forms.
| Platform | Legal Entity on 1099-MISC | 2025 Threshold | Delivery Method |
|---|---|---|---|
| Chumba Casino | VGW Holdings / VGW Games | $600 | Email + mail |
| Stake.us | Medium Rare N.V. / Easygo | $600 | |
| McLuck | Blazesoft Ltd. | $600 | |
| WOW Vegas | Wow Entertainment | $600 | |
| Pulsz | Yellow Social Interactive | $600 | |
| High 5 Casino | High 5 Games | $600 | Email + mail |
| Fortune Coins | Blazesoft Ltd. | $600 | |
| Modo Casino | B2 Social | $600 | |
| Chanced | B2 Social | $600 | |
| RealPrize | B2 Social | $600 | |
| Crown Coins | Blazesoft Ltd. | $600 |
Important for 2026: The federal reporting threshold increases to $2,000 for payments made on or after January 1, 2026. If you redeem $1,500 in Sweeps Coins during 2026, the platform will not issue a 1099-MISC — but you are still legally required to report the full $1,500 as income.
Be aware that some states maintain separate reporting thresholds, which may remain at $600 even after the federal increase. Always verify your state’s requirements.
This table reflects the most current information available as of February 2026. If a platform is missing or listed incorrectly, please contact us so we can keep this reference up to date.
Can You Deduct Sweepstakes Casino Losses?
This is the question nearly every experienced sweepstakes player asks — and unfortunately, the answer is not straightforward. The IRS has not issued specific guidance on whether sweepstakes casino play qualifies for the gambling loss deduction under Section 165(d) of the Internal Revenue Code.
The Current Rule for Traditional Gambling
For regulated gambling activities such as casinos, sportsbooks, and poker, the IRS allows players to deduct losses against winnings, provided they itemize deductions on Schedule A.
Through tax year 2025, losses could be deducted up to 100% of winnings. Beginning in 2026, the One Big Beautiful Bill Act reduces that cap to 90%.
Why Sweepstakes Losses Are Different
The gambling loss deduction applies only when losses arise from a wager — a bet placed with something of value at risk. Sweepstakes casinos are intentionally structured so that no wager occurs.
Under the sweepstakes model, players purchase Gold Coins as an entertainment product and receive Sweeps Coins as a promotional bonus. Because Sweeps Coins are obtained without consideration, the IRS does not view sweepstakes play as gambling.
This creates a legal paradox:
- The IRS taxes Sweeps Coin redemptions as prize income because they are not considered gambling winnings
- To deduct losses, you would need to argue that your play is gambling, which contradicts the sweepstakes model
- Gold Coin purchases cannot be deducted as losses because Gold Coins have no cash-redeemable value
What Tax Professionals Recommend
Most tax professionals advise against deducting sweepstakes casino losses for several reasons:
- No IRS guidance explicitly supports loss deductions for sweepstakes play
- Claiming the deduction may increase audit or scrutiny risk
- If the deduction is denied, penalties and interest may apply in addition to the underlying tax
- For most recreational players, the potential tax benefit is small relative to the risk
That said, professional opinions do vary. If you have substantial sweepstakes activity — involving thousands of dollars in both redemptions and losses — consulting a CPA or tax attorney with gaming income experience is strongly recommended.
The 2026 OBBBA 90% Cap: Does It Even Apply to Sweepstakes?
The new 90% loss deduction cap has drawn significant attention across the gambling industry. Under this rule, even a traditional gambler who breaks perfectly even — winning $100,000 and losing $100,000 — would owe tax on $10,000 of “phantom income.”
For sweepstakes casino players, this issue may be largely academic. If sweepstakes losses are not deductible at all — which is the prevailing interpretation — the 90% cap does not materially change your tax treatment.
However, if future IRS guidance or court rulings extend loss deductibility to sweepstakes play, the 90% cap would apply.
It is also worth noting that several bipartisan bills — including the FAIR BET Act and the WAGER Act — have been introduced in Congress to repeal the 90% cap and restore full loss deductibility. As of February 2026, these proposals have not yet passed, but they continue to receive industry and bipartisan support.
State-by-State Tax on Sweepstakes Winnings
Federal taxes are only part of the picture. Depending on where you live, you may also owe state income tax on your sweepstakes casino winnings. State rules vary widely — from no tax at all to some of the highest marginal rates in the country.
Because sweepstakes casinos operate under promotional law rather than traditional gambling statutes, states do not always treat Sweeps Coin redemptions consistently. Understanding your state’s approach is essential for accurate reporting and long-term responsible play.
States With No Income Tax on Sweepstakes Winnings
Residents of the following states do not pay state income tax on sweepstakes winnings. Federal income tax still applies.
| State | Notes |
|---|---|
| Alaska | No state income tax |
| Florida | No state income tax |
| Nevada | No state income tax |
| New Hampshire | No tax on earned income; interest and dividend tax recently phased out |
| South Dakota | No state income tax |
| Tennessee | No state income tax on gambling or prize winnings |
| Texas | No state income tax |
| Washington | No state income tax (note: sweepstakes casinos face legal challenges) |
| Wyoming | No state income tax |
States Where Sweepstakes Casinos Are Now Banned
Several states enacted sweepstakes casino bans during 2025–2026. If you redeemed Sweeps Coins before a ban took effect, those winnings are still taxable. A prohibition on future play does not erase past tax obligations.
- California: AB 831 effective January 1, 2026
- Connecticut: Sweepstakes casinos banned through legislation
- Montana: Department of Justice enforcement action
- New Jersey: Statewide ban enacted in 2025
- New York: Promotional sweepstakes ban enacted
- Washington: Ongoing legal challenges, including the Attorney General’s lawsuit against High 5 Games
Additional states — including Indiana, Illinois, Florida, Maine, Massachusetts, and Virginia — have proposed legislation that could restrict sweepstakes casinos in the near future.
If you live in one of these states, track your redemptions carefully. Mid-year access loss can complicate recordkeeping and increases the importance of understanding which platforms are legitimate platforms versus high-risk operators.
States With High Tax Rates on Gambling or Prize Income
Players in the following states should expect to owe a meaningful amount in state tax on top of federal income tax:
- New York: Up to 10.9% (plus NYC surcharge, if applicable)
- California: Up to 13.3% on income (California exempts state lottery winnings; application to sweepstakes prizes remains legally unclear)
- Oregon: Up to 9.9%
- Minnesota: Up to 9.85%
- New Jersey: Up to 10.75%
- Connecticut: 6.99% flat rate on gambling income
Important: Nine states — Connecticut, Illinois, Indiana, Kansas, Louisiana, North Carolina, Ohio, Rhode Island, and Vermont — do not allow itemized deductions for gambling losses at the state level.
This means residents of these states may owe state tax on their gross sweepstakes winnings even if losses are deductible on the federal return. Players using advanced approaches such as an RTP wash strategy should be especially careful when estimating state exposure.
Are Gold Coin Purchases Tax-Deductible?
No. Gold Coin (GC) purchases are not tax-deductible. Gold Coins are classified as an entertainment product with no real-money value, and because they cannot be redeemed for cash, the IRS does not treat them as a “wager” or a deductible expense.
Think of Gold Coins the same way you would think about buying movie tickets or a video game subscription. If you spend $100 on GC to play free slots, that $100 is the cost of entertainment — not a gambling loss.
If bonus Sweeps Coins (SC) included with a GC package are later redeemed for cash, the redemption amount is taxable income. However, the original Gold Coin purchase cannot be used to offset or reduce that income.
This is one of the most frustrating aspects of sweepstakes casino taxation. A player who purchases $500 in Gold Coin packages, redeems $300 in Sweeps Coins, and feels like they “lost $200” may still owe taxes on the full $300 redemption — with no offset available.
How to Track Your Sweepstakes Casino Wins and Losses
Good recordkeeping is not just about audit protection. It is also the only reliable way to calculate your true tax exposure across multiple sweepstakes platforms throughout the year.
This becomes especially important if you use strategies that involve frequent purchases and redemptions, such as bonus cycling or advanced churn approaches. Tools like a discount churn calculator can help estimate outcomes, but accurate records are still essential.
What to Record
- Date of each Sweeps Coin redemption and the dollar amount received
- Platform name associated with each redemption
- Date and amount of every Gold Coin purchase (even though not deductible, this establishes spending history)
- Sweeps Coins earned from free methods such as daily logins, AMOE entries, or promotions
- Any federal or state tax withholding applied by the platform
- Copies of all Form 1099-MISC documents received
- Screenshots or exports of transaction history from each platform’s account dashboard
How Long to Keep Records
In most cases, the IRS can audit a tax return up to three years from the filing date. If underreported income exceeds 25% of gross income, that window extends to six years.
For unreported income, there is effectively no statute of limitations. The safest approach is to retain all sweepstakes casino records for at least seven years.
Practical tip: Download or screenshot your transaction history from each platform at least once per quarter. Some sweepstakes casinos purge historical data after account closure or following state-level bans.
If a platform exits your state mid-year, you may lose access to your account entirely — including your redemption history. Having local copies of your records ensures you can still file accurately and defend your return if questioned.
Frequently Asked Questions
Below are the most common questions players ask about sweepstakes casino taxes. All answers reflect current federal guidance and industry practice as of early 2026.
Do you pay taxes on sweepstakes casino winnings?
What is the $600 rule for sweepstakes casinos?
What tax form do sweepstakes casinos send?
Can you deduct sweepstakes casino losses?
Do I owe taxes if I didn’t receive a 1099-MISC?
Are Gold Coins taxable?
Has the tax law changed for sweepstakes in 2026?
Which states don’t tax sweepstakes winnings?
What if the company name on my 1099-MISC doesn’t match the casino?
I redeemed SC in a state that has since banned sweepstakes casinos. Do I still owe taxes?
Tax Disclaimer
Sweepedia is not a tax advisory service. The information in this guide is provided for educational purposes only and does not constitute legal, financial, or tax advice. Tax laws are complex, vary by jurisdiction, and change frequently.
The tax treatment of sweepstakes casino winnings involves unresolved legal questions that the IRS has not yet addressed with formal guidance. We strongly recommend consulting a qualified tax professional — such as a CPA or enrolled agent — for advice tailored to your situation, especially if you have significant sweepstakes activity or play on multiple platforms.
This guide was last reviewed and updated in February 2026. While we make every effort to keep this information current, laws and interpretations may have changed since publication. Always verify with the IRS or a licensed professional before filing.
Sources and Further Reading
- IRS Topic No. 419 — Gambling Income and Losses
- IRS Publication 525 — Taxable and Nontaxable Income
- IRS Publication 529 — Miscellaneous Deductions
- IRS Instructions for Forms W-2G and 5754 (Rev. January 2026)
- One Big Beautiful Bill Act (OBBBA), Section 70433 — 1099 threshold changes
- One Big Beautiful Bill Act, Section 165(d) amendment — gambling loss deduction cap
- Joint Committee on Taxation — revenue estimates for OBBBA gambling provisions
- RSM US — “Big Beautiful Bill Brings Big Tax Reporting Changes for Casino Industry” (August 2025)
- National Association of Tax Professionals — “Will the OBBBA Gambling Deduction Change Be Reversed?” (2025)