Reporting Gambling Income And Losses On Your Tax Return

Reporting Gambling Income

Reporting Gambling Income On Your IRS Return

Whatever game of chance you play in hopes of winning money, whether you play craps, blackjack, or bet on the horses, all of your gambling winnings are taxable and must be reported on your income tax return. If you gamble, these tax tips can help you at tax time. Here’s what you need to know about reporting gambling income and loss. 

What Is Gambling Income?

Income from gambling includes winnings from lotteries, raffles, horse races and casinos. It also includes cash and the fair market value of prizes you receive, such as cars and trips and you must report them on your tax return

IRS Form W-2G, Certain Gambling Winnings

If you win, you may receive a Form W-2G, Certain Gambling Winnings , from the payer. The form is used for reporting gambling income to you and the IRS. The payer issues the form depending on the type of game you played, 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.

How To Go About Reporting Gambling Income

Reporting gambling income and winnings on your federal income tax return is a must. This is true even if you do not receive a Form W-2G. A common misconception is that the only income that you need to report is the income reported on the W-2G.

You must report ALL income whether reported on a W-2G or not; much like the reporting of earned income from wages, the income must be reported on your tax return whether a W2 or 1099 is issued (i.e. income received by cash or received “under the table” is still taxable income).

If you’re a casual gambler, reporting gambling income is done on the “Other Income” line of your Form 1040, U. S. Individual Income Tax Return. 

How To Go About Deducting Your Gambling Losses

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. 

The Importance Of Keeping Substantive Documentation Of Your Gambling Activity

You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or statements. You should also keep a diary or log of your gambling activity and gambling sessions. Your records should show your winnings separately from your losses. 

If you have questions about gambling income and losses, please call.

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Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

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Randall is the Founder of Tax Samaritan, a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the other unique tax issues that apply to taxpayers. Here, they help taxpayers save money on their tax returns.

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