Five Important Tips on Gambling Income and Losses
By: Stephen Crews
Updated: August 30, 2012
Whether
you roll the dice, bet on the ponies, play cards or enjoy slot
machines, you should know that as a casual gambler, your gambling
winnings are
fully taxable and must be reported on your income tax return. You can
also deduct your gambling losses...but only up to the extent of your
winnings.
Here are five important tips about gambling and taxes:
- Gambling income
includes, but is not limited to, winnings from lotteries, raffles, horse
races, and casinos. It includes cash winnings and the fair market value
of prizes such as cars and trips.
- If
you receive a certain amount of gambling winnings or if you have any
winnings that are subject to federal tax withholding, the payer is
required to issue you a Form W-2G, Certain Gambling Winnings. The payer
must give you a W-2G if you receive:
- $1,200 or more in gambling winnings from bingo or slot machines;
- $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
- More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
- $600
or more in gambling winnings (except winnings from bingo, keno, slot
machines, and poker tournaments) and the payout is at least 300 times
the amount of the wager; or
- Any other gambling winnings subject to federal income tax withholding.
3. Generally, you report all gambling winnings on the "Other income" line
of Form 1040, U.S. Federal Income Tax Return.
4.
You can claim your gambling losses up to the amount of your winnings on
Schedule A, Itemized Deductions, under 'Other Miscellaneous Deductions.'
You must report the full amount of your winnings as income and claim
your allowable losses separately. You cannot reduce your gambling
winnings by your gambling losses and report the difference.
Your records should also show your winnings separately from your losses.
5.
Keep accurate records. If you are going to deduct gambling losses, you
must have receipts, tickets, statements and documentation such as a
diary or similar record of your losses and winnings. Refer to IRS
Publication 529, Miscellaneous Deductions, for more details about the
type of information you should write in your diary and
what kinds of proof you should retain in your records.
For
more information on gambling income and losses, see IRS Publication
529, Miscellaneous Deductions, or Publication 525, Taxable and
Nontaxable Income,
both available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
To automatically receive IRS tax tips, visit IRS.gov, click on "News" and select "e-News Subscriptions."
Links:
- Publication 525, Taxable and Nontaxable Income
- Publication 529, Miscellaneous Deductions
- Tax Topic 419, Gambling Income and Expenses
- Form W-2G, Certain Gambling Winnings
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