Do I Have To Report My Gambling Winnings and Losses?

Sep 05, 2013 By Nielsen Law Group In Taxation No Comment Tags : , ,

Whether you roll the dice, play cards or bet on the ponies, all your winnings are taxable. But your gambling losses may also be deductible. Here are a few things to know about gambling winnings and losses when it comes to taxes.

  1. Gambling income includes any type of payment obtained from wagering and includes winnings from lotteries, raffles, horse races and casinos to name just a few. 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 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.
  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.

While gambling may be an entertainment activity, the IRS takes it very seriously. If you have any questions about gambling winnings and losses, see Publication 525 or contact your tax attorney.

By: Evan A. Nielsen (Licensed in California)

Still have more questions? Call us today at (480) 888-7111 to schedule your free tax consultation or submit a web request.