Hello everyone, TH Tax Services here today to assist you with your tax concerns this year. As the deadline for taxes edges ever closer, it is no surprise that we can feel a lingering stress over just how much we really owe. Come to think of it, have you spent some time gambling this year? Whether you’ve won or lost, don’t think for a second that Uncle Sam won’t be keeping track of your windfall. If you’re a casual gamer (read: not a professional), you may be responsible to pay taxes on your winnings. Conversely, if you’ve lost a significant sum, the Internal Revenue Service may actually have some savings that you could be eligible to claim.
If this is news to you, then perhaps it is in your best interest to Find a Tax Professional for Gambling Taxes that knows the myriad rules that come with the roulette table. Sometimes your best bet is on a competent Accountant that can earn you significant savings. In this article, we’ll take a look at the broader aspects of gambling taxes. If you still remain curious about your tax responsibility—and you should—we’ll provide information to give you peace of mind for the impending tax deadline.
Income from Gambling?
After a successful trip to Las Vegas, it’s nice to have some extra cash in your pocket when all the chips have been cashed in. What portion of this constitutes gambling income? In short, gambling income includes, but is not strictly limited to, winnings from the lottery, horse races, casinos—even that quaint office pool you’ve been crossing your fingers for is subject to the IRS’s definition of income.
In addition, suppose you’ve won a prize from a raffle, like an all-expense-included vacation to the Caribbean or a new car—yep, they’re also taxable. While not being tabulated the same way, these prices are evaluated according to their fair market value. A simple definition of fair market value is that whatever you think you’d be able to acquire from private sellers is what your tax responsibility is. Of course, this is a bit of a grey area, so we recommend that you Find a Tax Preparer to help sort out the fair market value of your new yacht. For the brave, the IRS provides some helpful information on gambling income in Publication 525, Taxable and Nontaxable Income.
More on Your Winnings…
If you have been lucky at the craps tables, then may we offer our congratulations! Not only have you come into cash, but you’ve came into another realm of tax responsibility. The payer of your winnings is required by the IRS to issue you Form W-2G, Certain Gambling Winnings. However, this is where the law makes things a bit tricky. Different types of gambling are subject to different requirements for your filing.
And just to add to emphasis, the IRS designates “all other gambling winnings that are subject to federal income tax withholding.” A bit ambiguous, isn’t it?
On your Form 1040, you must report all of your gambling winnings as “Other Income” (located on line 21). Despite the above prerequisites, winnings that are not subject to withholding are still required to report on your tax returns. In addition, there may also be a requirement for you to pay an estimated tax on the winnings from gambling.
For more information, the IR provides Publication 505, Tax Withholding and Estimated Tax to help you determine your tax responsibility. For those that are filing as a non-resident alien of the US, you are required to fill out Form 1040NR, US Nonresident Alien Income Tax Return. For further information, Publication 519, US Tax Guide for Aliens and Publication 901, US Tax Treaties offers further information.
Losses from Gambling
We can’t all be winner, can we? Just as we are required to fill out our taxes on our gambling winnings, if you want to write off some of your losses, you’ll have to file it. The catch is that if you file a standard deduction instead of itemizing, you won’t qualify. To complicate the matter, it’s worthy to note that your gambling losses that you choose to write off cannot exceed the amount of gambling income that you’ve earned.
If you want to claim these losses, refer to Form 1040, Schedule A (refer to line 28, “Other Miscellaneous Deductions”). In addition, refer to Schedule A, Itemized Deductions, under “Other Miscellaneous Deductions.” You can report the amount of your winnings as income and losses separately, as each are subject to different rules of taxation. It is important to note that simple subtracting your winnings from losses and reporting the sum is discouraged—you must report each separately.
Unfortunately, if you are filing as a non-resident alien of the U.S., you do not have the ability to deduct your gambling losses.
A Final Note
Still with us?
If you haven’t guessed, the IRS will need some documentation to support your claims. You must have the ability to provide any type of evidence (receipts, statements, ticket) that shows the amount of you’ve both won and lost. For the finer points of what constitutes valid recordkeeping, refer to Publication 529, Miscellaneous Deductions. Accurate records will make your tax responsibility ultimately easier in the long-run.
