Gambling Problem: Reporting Winnings to the IRS

A common question for consumers completing a tax return is whether or not gambling winnings are taxable, and how such winnings would be reported on the return. In most all circumstances, money won from gambling is fully taxable and must be reported on tax returns.

Are you reporting your gambling winnings and losses to the IRS?
Are you reporting your gambling winnings and losses to the IRS?

In fact, sometimes the payer of gambling winnings might provide a Form W-2G and have federal income taxes withheld from the winnings. Gambling income ranges from lottery winnings, raffle, horse and dog races and casinos. The people that win on “The Price is Right” will probably face some hefty taxes as well, as cars, houses, trips and other noncash prizes are usually taxed at their fair market value.

The full amount of gambling winnings must be reported on Form 1040, line 21, regardless of the amount of whether the payer provided a W-2G form. Gamblers may also be able to deduct their losses if they are not more than winnings.

Keeping receipts and other statements documenting winnings and losses is important, as they are required by the IRS.

Free tax software like TaxACT can help taxpayers navigate through the confusing federal and state tax codes so that returns are guaranteed accurate.

DISCLAIMER:

This entry is for information only and does not constitute tax advice, nor does it serve as legal advice. There is no intent to create, nor does this blog site constitute, a professional tax practitioner/client relationship. You need to consult with your tax professional prior to acting on any item of information you learn on this site.

Tax laws change from time to time, and are different in various locations.

Tax Tip: Claim Your Gambling Winnings and Losses!

Internal Revenue Service Tax Tips on Shoeboxed Blog

What will you owe Uncle Sam if Lady Luck happens to be on your side?

Gambling winnings are fully taxable and must be reported on your tax return.

You must file Form 1040 and include all of your winnings. Gambling income includes, among other things, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. You can find more information in Publication 525, Taxable and Nontaxable Income.

Anyone who pays your winnings or awards you a prize is required to issue you a Form W-2G if your winnings are subject to Federal income tax withholding or if your winnings are over a certain amount.

However, all gambling winnings must be reported regardless of whether any portion is subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on tax withholding on gambling income, refer to Publication 505, Tax Withholding and Estimated Tax.

If your luck isn’t always so good, you may deduct gambling losses. Losses may be deducted only if you itemize deductions and only if you also have gambling winnings. Claim your gambling losses as a miscellaneous deduction on Form 1040, Schedule A. But remember, the losses you deduct may not be more than the gambling income you report on your return.

Even though you may be on vacation, if you want to deduct losses when you file your return next spring, it is important to keep an accurate diary or similar record of your gambling winnings and losses right now.

To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show both your winnings and losses.

For more information, refer to IRS Publication 529, Miscellaneous Deductions.

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