Talk to a tax professional: This guide explains the basics so you know what to ask. It isn't tax advice, and we're not accountants. Tax rules change, and your situation is your own. For anything beyond a small amount, see a CPA or equivalent tax professional.
The short version
- Money you redeem from a sweepstakes casino is taxable income, whether or not the site sends you a form.
- The IRS hasn't said whether sweepstakes redemptions count as prizes or as gambling winnings. That choice affects whether you can use your coin purchases to reduce your tax burden.
- Keep a record of every purchase and every cash-out from day one.
Your redemptions are income.
The IRS taxes contest and drawing prizes at their fair market value, even small ones. It also taxes gambling winnings and says you must report them whether or not you get a tax form. Either way, cash and gift cards you redeem count as income.
A common mistake is reporting only your profit. In general, what you report is what you redeemed. Whether you can subtract what you spent depends on the next question.
Prizes or gambling winnings?
This is the part nobody has settled. Sweepstakes casinos are built on the idea that Sweeps Coins are free sweepstakes entries, which points toward treating redemptions as prizes. Some tax preparers treat them as gambling winnings instead. The IRS hasn't issued guidance on sweepstakes casinos.
Here's why it matters:
| Treated as prizes | Treated as gambling winnings | |
|---|---|---|
| Where it goes on your return | "Prizes and awards" on Schedule 1 | "Gambling winnings" on Schedule 1 |
| Can money spent on coins reduce your tax? | Generally no. Buying Gold Coins counts as buying entertainment. | Possibly, as gambling losses, but only if you itemize (see below). |
Don't assume you can deduct what you spent on coins. Ask a professional which treatment fits your situation.
Tax forms you might get
Form 1099-MISC. Many sweepstakes sites send a 1099-MISC when you redeem enough in a year. The threshold depends on the year you were paid:
- Paid in 2025 or earlier: $600 or more from one site.
- Paid in 2026 or later: $2,000 or more from one site. The amount rises with inflation starting in 2027.
Some websites still list $600 for 2026. That changed with the federal tax law passed in July 2025.
Not getting a form doesn't make the income tax-free. If you redeem $1,500 from one site in 2026, you won't get a form, but you still owe tax on it.
Form W-2G. Licensed casinos use this form for gambling winnings. Sweepstakes sites generally send a 1099-MISC instead.
Form 1099-K. PayPal and similar apps send this for payments for goods and services above $20,000 and 200 transactions a year (lower in a few states). It rarely applies to sweepstakes play.
If your redemptions count as gambling winnings
Two rules limit what you can deduct:
- You must itemize. Gambling losses go on Schedule A. Most people take the standard deduction instead, which is $16,100 if you're single and $32,200 for married couples filing jointly for 2026. If you take it, you can't deduct gambling losses at all.
- From 2026, only 90% of losses count. A 2025 federal law limits the deduction to 90% of your losses, still capped at your winnings. So if you win $10,000 and lose $10,000, you can deduct only $9,000 and pay tax on $1,000 you didn't keep. Congress is considering a bill to undo this, but as of this page's date, it isn't law.
Keep good records
The IRS expects you to keep a log of winnings and losses, plus receipts and statements that back it up. For sweepstakes play, a simple spreadsheet works. For each day and site, write down:
- Money spent on Gold Coins, and how you paid.
- Sweeps Coins received (free, by mail, or with a purchase).
- Cash-outs: amount, date, and method.
Also keep each site's transaction history, your bank and card statements, and every 1099 you receive. If a form arrives after you've filed, you may need to amend your return.
State taxes
Most states tax prizes and gambling winnings as ordinary income. Nine states have no broad income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Some states don't allow deductions for gambling losses at all. Your state's rules may differ from the federal ones, so ask your tax professional about both.
Questions to bring to your tax professional
- Should I report my redemptions as prizes or gambling winnings?
- Can any of my Gold Coin purchases reduce my taxable income?
- Would itemizing help me this year?
- Do I need to make estimated tax payments during the year?
- How does my state treat these redemptions?
Overall: Talk to a tax professional before you file. We can explain the basics, but we can't tell you what to put on your return or offer personalized tax advice.