Would you love to roll the dice, playing cards, betting on online casinos or on ponies? However you are playing, one thing is clear: gambling winnings in the eyes of the IRS are always taxable revenues. You could think it’s all about gambling the IRS says. But in reality the IRS is providing some tax advice for casual gamblers.
Winnings Are Profits.
Income from gambling covers lottery winnings, raffles, horse races, and casinos. Money winnings naturally are taxable. Regardless of whether you earn an IRS FormW-2 G, you will declare all your gambling winnings as income on your tax return.
Wins In Charity.
But even if you don’t win cash, also taxable are the products you get. They will have to pay tax on the fair market value of the prizes they earn and certificates, such as vehicles or holidays.
When you win, you’re taxable irrespective of whether you get casino or other payer tax forms. You’re likely to receive an IRS FormW-2 G these days, depending on the type of gambling, the size of your winnings, and other factors. Think of it like the Form 1099 you get from your bank detailing the amount of interest you got. You and the IRS receive a copy so you don’t forget to report it on your return.
If the payer withholds taxes from your winnings, you must submit a FormW-2 G too. Some gaming gains are subject to 25 per cent withholding. If your winnings amount to more than $5,000 less than the wager amount, withholding is generally required if the winnings are from sweepstakes, wagering pools or lotteries. Wins from other wagering transactions are generally subject to retention if the wins are at least 300 times the wagered amount. SeeW-2 G Form Instructions and 5754.
Where Reporting To.
If you’re a casual gambler, record your winnings on your Form 1040 “Other Revenue” section.
Under Schedule A you can deduct your gambling losses to your Form 1040. All of the itemized deductions go that direction. But remember that the amount of your winnings is limited to your deduction. You will declare your winnings as profits, and separately claim your permissible losses. With your losses, you can’t reduce your winnings, just record the difference.
You have to keep a clear record of your gambling activity. This is the law that is the toughest to swallow for many gamblers but the IRS means it. Hold such things, such as receipts, tickets, etc. You should also keep a diary of your activity, or similar records. Your records should show your winnings off your losses separately.