income — September 11, 2012

Don't Roll the Dice on Gambling Winnings

by Bob Williams

gambling winningsWell, you ought to be feeling pretty good right about now.

That casual visit to the casino netted a four-figure payday. The only word you needed to know tonight was, "JACKPOT!" But as you're driving home, don't be surprised if you think you feel a ghostly hand … reaching … into your wallet.

So enjoy yourself now. Winning at the casino or the racetrack is fun. But you need to remember that as a casual gambler, your
gambling winnings are fully taxable and must be reported on your income tax return.

You really don't want to roll the dice on not reporting gambling winnings. Just like in the casino, when it comes to taxes, the house ALWAYS gets its cut. To stay straight with the IRS, be honest when doing your tax return, and you won't trade a Full House for The Big House.

Trust us; the IRS has been down this road before. So your safest bet is to take a look at the five little hints below - and pay the dealer.

1. 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.

2. 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 get:

  • $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.

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
, 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 525, Taxable and Nontaxable Income, as well as Tax Topic 419, Gambling Income and Expenses. If you're a visual learner, try the IRS video on YouTube: Miscellaneous Income.

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