Tips on Gambling Income and Losses

Whether you roll the dice, play cards or bet on the ponies, ALL of your winnings are taxable. Review these tips now so that you are not surprised next April 15th.

  1. Gambling income includes winnings from lotteries, raffles, horse races and casinos. It also includes cash and the fair market value of prizes you receive, such as cars and trips.
  2. If you win, you may receive a Form W-2G, Certain Gambling Winnings, from the payer. The form reports the amount of your winnings to you and the IRS. The payer issues the form depending on the type of gambling, the amount of winnings, and other factors. You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.
  3. You must report ALL of your gambling winnings as income on your federal income tax return. This is true even if you do not receive a Form W-2G.
  4. If you’re a casual gambler, report your winnings on the Other Income line of your Form 1040, U. S. Individual Income Tax Return. ‘Casual’ does not refer to the manner of your dress while you are gambling. A casual gambler is anyone that is not a professional gambler.
  5. You may deduct your gambling losses on Schedule A, Itemized Deductions. The deduction is limited to the amount of your winnings. You must report your winnings as income and claim your allowable losses separately. You cannot reduce your winnings by your losses and report the difference.
  6. You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or other documentation. You should also keep a diary or similar record of your activity. Your records should show your winnings separately from your losses.

 

IRS Circular 230 Disclosure

Pursuant to IRS Regulations, we inform you that any tax advice provided or implied on this post (including attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer.

While the information contained in this post is believed to be reliable, we cannot guarantee its accuracy or completeness.