Do I owe Illinois state tax on sports betting and gambling winnings?
By the W2gMatch team · Sources checked 09-06-2026 · General information, not tax advice.
Yes, and Illinois allows no deduction for losses at all. Illinois taxes gambling winnings at its flat 4.95% rate on federal adjusted gross income, and the Department of Revenue states plainly that Illinois does not allow a deduction for gambling losses. Illinois casinos, sportsbooks and the lottery withhold state tax on winnings subject to federal withholding, for residents and nonresidents alike.
How Illinois taxes the winnings
Illinois income starts from federal adjusted gross income, which includes all gambling winnings, and applies a flat 4.95%. [1] For tax years ending on or after December 31, 2019, Illinois taxes Illinois lottery, gambling and sports wagering winnings regardless of the winner's residency. [2]
Illinois taxes the gross. The break-even bettor pays state tax on the whole $100,000.
Losses on the Illinois return
“Illinois does not allow a deduction for gambling losses.” [3] Federal itemized deductions are not a subtraction on the Illinois return; only the subtractions listed on Schedule M and in Publication 101 are allowed, and gambling losses are not among them. [3]
The consequence is severe for a high-volume player. A bettor who wins $100,000 and loses $100,000 owes Illinois 4.95% on the full $100,000, about $4,950, on a year with no profit, before the federal 90% limit adds its own phantom income. The session method, which reduces the gross winnings figure without changing the real result, matters more in Illinois than almost anywhere.
What is withheld at the window
Illinois withholding is required on a single Illinois Lottery payment of $1,000 or more and on gambling winnings that are subject to federal withholding and not withheld by another state, which includes sports wagering; it applies “for both residents and nonresidents.” [4] Winners of $1,000 or more from the lottery, or more than $5,000 from other gambling, complete Form IL-5754. [4] The rate is the 4.95% income tax rate. [1]
Residents, part-year residents and visitors
Residents are taxed on winnings from everywhere, with a credit on Schedule CR for tax paid to another state on the same winnings. [4] Nonresidents report “the Illinois State Lottery, Illinois gambling, and sports wagering winnings (even if you were a resident of a reciprocal state)” on Schedule NR. [2] A wager placed on an Illinois app while in Illinois is Illinois gambling.
The federal return underneath
Federal: for tax years beginning in 2026, only 90% of gambling losses are deductible (the 90% gambling loss cap).
Every state page sits on the same federal rules: all winnings are reported on Schedule 1 whether or not a form arrives, and losses are an itemized deduction capped at winnings and, from 2026, at 90% of losses under amended section 165(d). The federal loss page and the by-state table show how Illinois compares.
Related questions
Can I deduct gambling losses on my Illinois return?
No. The Illinois Department of Revenue states that Illinois does not allow a deduction for gambling losses, and federal itemized deductions are not an Illinois subtraction.
I live in Indiana and bet on an Illinois app in Chicago. Do I owe Illinois tax?
Yes. Illinois gambling and sports wagering winnings are Illinois-source income even for residents of reciprocal states, and are reported on Schedule NR.
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See the federal side of the same numbers
The calculator shows the federal taxable figure and the phantom income the 90% limit creates. Illinois's tax applies on top.
Sources
- Tax Foundation, Illinois tax rates and rankings 2026 (4.95% flat), 2026 (secondary source)
- Illinois Department of Revenue, 2025 IL-1040 Schedule NR instructions, tax year 2025
- Illinois Department of Revenue, What other income is not allowed as a subtraction?, read September 6, 2026
- Illinois Department of Revenue, Publication 130: Withholding Illinois income tax for lottery or gambling winnings, February 2026
Related
This page is general information about how U.S. federal and state tax rules apply to gambling, written to be checked against the sources it cites. It is not tax advice for your situation. A licensed CPA or enrolled agent should review your return before it is filed.