The IRS recently released “Five Important Tips on Gambling Income and Losses” for those playing slot machines, betting on ponies, and any other gambling activity. With this release is the firm reminder to gamblers that winnings are fully taxable, and that the winnings must appear on your income tax return. It also notes that losses can be deducted, as long as it does not surpass the amount of winnings.
The five tax tips are as follows:
· If you have any questions regarding what constitutes gambling income, it includes—but is not limited to— lottery winnings, betting on horses, casino winnings, and raffles. Regardless of whether it is a cash winning or the fair market value of prizes, like cars and vacation, it is taxable income that must be reported.
· If you are a lucky winner that falls under the following monetary categories, make sure that you have received a Form W-2G, “Certain Gambling Winnings.” The special circumstances for the receipt of the form are listed below:
o If $1, 200 or more is won from playing bingo or the slots,
o If $1, 500 or more in proceeds is won from keno,
o If more than $5, 000 in winnings is received from a poker tournament.
o If more than $600 or more is won (excluding winnings from the above-mentioned gambling methods) and the amount received is at least 300 times the amount of the money waged.
· In general, all winnings from gambling activity can be reported in the “Other Income” section of your income tax return.
· The section wherein you can claim your gambling losses (up to the amount won, as previously stated) is your Schedule A, Itemized Deductions, below “Other Miscellaneous Deductions.” It is important to note that gambling winnings and losses cannot be reported together. The IRS will do the math. You cannot deduct your losses from your winnings and report that number in your return. The IRS will flag this as an incorrect reporting and you could face questions.
· In order to deduct gambling losses, you must have an accurate accounting—including receipts, tickets, statements, etc.—of your losses. A diary documenting your winnings and losses, or another record in the same vein, is important to keep.
If you have any questions regarding filing a tax return with gambling winnings as income, please contact your knowledgeable tax professionals. They will assist you in reporting your gambling income appropriately.
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