Don’t Gamble with Taxes

Those who like to gamble should be aware of how casual gaming can affect your taxes. Any money you win through gambling is fully taxable and must be reported to the IRS at tax time. There are several types of gambling winnings: lotteries, raffles, horse races, and casinos. Along with straight cash winnings, gambling income also includes that fair market value of any prizes won, like vacations, cars, or electronics.

You should be given a Form W-2G, Certain Gambling Winnings, when you have won any amount that is subject to federal tax withholding. Gambling income should be reported as “Other Income” on your Form 1040 when you file your federal tax return. You should even report winning that aren’t subject to taxes on this form. Nonresident aliens of the United State will have to filea special tax form, 1040NR, U.S. Nonresident Alien Income Tax Return, to report all gambling income. It’s important to note that you may be required to pay estimated taxes on your winnings.

In order to deduct losses from gambling, you have to itemize your deductions. The amount deducted cannot exceed the amount of your gambling income reported. Gambling losses are claimed one line 28, Other Miscellaneous Deduction, on the Form 1040. Nonresident aliens are not eligible to deduct losses incurred through gambling activities.

You will need to keep an accurate record of all losses and gains in relation to gambling. When you claim your losses, you will have to prove the amount deducted by showing receipts, tickets, statements, or other documentation that depicts wins and losses.