If you like to gamble, then I have a wager for you. I’ll bet that you can learn something new about gambling and taxes from this article!
Whether you’re into rolling the dice, horse racing, cards, slot machines, or even betting on the Super Bowl or playing bingo, did you know that your gambling winnings are fully taxable and must be reported on your tax return? Did I win the bet yet?
Here’s some information about gambling and taxes:
1-Gambling income isn’t just limited to casinos or horse racing, but also includes lottery winnings, raffles, and even the fair market value of prizes, such as cars and trips.
2-The payer (casino, race track, etc) is required to give you a Form W-2G (Certain Gambling Winnings) if you receive $1,200 or more in winnings from bingo or slot machines, more than $5,000 from a poker tournament, or $600 or more in other gambling winnings (and the payout is at least 300 times the amount of the wager). There are other instances where Form W-2G is required, but I’ve covered the more common ones.
3-Generally you will report your gambling winnings on the “other income” line of your tax return (Form 1040).
4-You can claim your gambling losses to the extent of your winnings, as an itemized deduction on Schedule A, under “other miscellaneous deductions”. Note that this type of deduction is not subject to the 2% adjusted gross income limitation that’s applicable to items such as tax preparation fees, safe deposit box fees, and unreimbursed employee expenses. While you may have gambling losses, you’re not allowed to net them against the income; you must report the income as I indicated in #3, and report the losses as I just described.
5-You must keep accurate records to substantiate any gambling losses. These records can include receipts, tickets, statements, a diary, and any other documentation you have. As with any tax deduction, if you’re audited and don’t have adequate substantiation, the deduction will be disallowed.
I hope you found this information useful, whether I won the bet or not. Please forward this along to any of your gambling buddies, and happy (but responsible) gambling!