Withholding is required when the winnings, minus the bet, are:. Do I have to report it on my taxes? Gambling winnings, however, are considered to be "not wunnings connected" and so must generally be reported on Form NR. You will not be able to itemize your gambling losses on your Illinois return. I want to know the rate of WH.The federal government taxes gambling winnings at the highest rates in a high-tax state like California or New York, the top tax bracket is about 50 percent. The following rules apply to casual gamblers who aren't in the trade or business of gambling. Gambling winnings are fully taxable and you must report the. Most people don't think about taxes on their way to the casino. California generally does not tax California Lottery winnings for California.