The IRS recently sent out a tax tip in regards to gambling winnings and losses. Most people don’t realize that their gambling habits have tax implications and they must be included on their tax return. Gambling winnings and losses include all forms of legal gambling and not just your normal casino games. All gambling winnings, which includes lotteries, raffles, horse races, and casinos, are fully taxable. Winnings not only include cash but the fair market value of prizes. For example, if you were in a golf tournament and you sunk a hole in one to win a car you would have to report the fair market value of that car on the tax return. Once you hit a certain amount of gambling winnings the payer is required to give you a Form W-2G. A Form W-2G is required for the following winnings amount (Provided by the IRS):
- $1,200 or more for bingo or slot machines
- $1500 or more from keno minus the amount of the wager
- More than $5000 from a poker tournament, reduced by the wager or buy-in
- $600 or more in gambling winning besides the aforementioned and the payout is at least 300 times the amount of the wager
- Any other gambling winnings subject to federal income tax withholding
Gambling losses works a little differently. You can claim your gambling losses on Schedule A under Other Miscellaneous Deductions. You must claim your full amount of gambling losses and report your gambling winnings. You are not allowed to just report the difference. Always show winnings and losses separately! To be able to claim your losses you must keep accurate records of your wins and losses. You must have proof of these wins and losses. For example receipts, tickets, and statements. For more information on gambling winnings and losses visit IRS.gov or contact our office.