Ohio's New Withholding Rates: Why Your W-2G Looks Different

If you hit a big parlay in 2026 and notice a smaller chunk taken out than you expected, don't celebrate too hard. Ohio's gambling withholding rate did drop—but that doesn't mean you owe less in taxes. Here's what actually changed and why the distinction matters.

The Rate Change Timeline

Ohio has been steadily reducing its gambling withholding rate over the past year:

So if you hit a $5,000 winner in 2026, Ohio withholds $137.50 instead of the $200 they would have taken in early 2025. That's $62.50 more in your pocket... right now.

Withholding vs. Tax Liability: The Critical Difference

Here's where a lot of bettors get confused—and where it can cost you.

Withholding is what gets taken out upfront. It's an advance payment on your taxes, not the final bill.

Tax liability is what you actually owe when you file your return. This is based on your total income, deductions, and Ohio's tax brackets—not the withholding rate.

When Does Withholding Apply?

Ohio doesn't withhold on every win. The rules are specific:

This means a $1,000 win from a $100 bet doesn't trigger withholding (10x payout, not 300x). But a $1,000 win from a $3 longshot parlay absolutely does (333x payout).

Practical Examples

What Shows Up on Your W-2G

When withholding applies, the sportsbook sends you (and the IRS) a W-2G form. Here's what you'll see:

• Box 1: Your gross winnings (the full amount before withholding)
• Box 2: Federal income tax withheld (if applicable)
• Box 4: Federal income tax withheld (duplicate)
• Box 14: State winnings (usually same as Box 1)
• Box 15: State (OH)
• Box 17: State income tax withheld (the 2.75%)

The key number for Ohio taxes is Box 17. That's what's been prepaid toward your state tax bill.

The Math You Actually Need

Let's say you're in a typical situation: you hit several parlays throughout 2026, some triggering W-2Gs, most not.

See what happened? Only $6,000 of your $15,000 in winnings triggered withholding. But you owe taxes on all $15,000. The $165 withheld doesn't cover your $525 liability.

Why Did Ohio Lower the Rate?

The rate reduction aligns withholding more closely with Ohio's actual income tax rates, which top out around 3.5% for most residents. The old 4% rate meant many bettors were over-withheld and had to wait for refunds.

The new 2.75% rate is closer to—but still below—most people's actual tax rate. This means:

• Less money tied up waiting for a refund
• But also less cushion if you under-report or don't track losses properly

Federal Withholding Still Applies

Don't forget: federal withholding is separate and unchanged. The IRS requires 24% federal withholding on gambling winnings over $5,000 (at 300x+ odds).

So that $10,000 parlay hit? You're looking at:

You won $10,000 but you're walking away with $7,325 until you sort it out at tax time.

What You Should Do

The lower withholding rate is nice, but it shifts more responsibility to you:

1. Track every bet—wins AND losses, regardless of W-2G status
2. Set aside money for taxes on wins that didn't trigger withholding
3. Consider estimated payments if you're winning consistently
4. Save your W-2Gs—you'll need them for your return

The Bottom Line

Ohio's 2.75% withholding rate means less gets taken upfront—but your actual tax bill is determined by your total winnings, your losses (up to 90% of wins in 2026), and your tax bracket.

Think of withholding as a deposit, not the final bill. The lower rate is convenient, but it doesn't reduce what you owe. It just changes when you pay it.

Track everything, set money aside for tax time, and don't let a smaller withholding number trick you into thinking you're in the clear. The IRS and Ohio both know what you won—make sure you do too.