If you’ve just won money or a prize from gambling in some way, the IRS may want a share of those winnings too. Gambling income includes, but is not limited to, winnings from raffles, casinos, bingo, horse races and lotteries. It also includes the fair market value of any prizes you win such as cars, trips and jewelry. The winnings must be declared on your income tax return.
If you win enough money when gambling, you will receive a Form W2-G and your winnings may be subject to income tax withholding. Keep in mind that your gambling winnings must be declared whether you receive a Form W2G or not. Here are the winning thresholds that create the requirement for gambling establishments to issue a Form W2G:
- From slot machines and bingo games, $1,200 or more
- From keno, $1,500 or more
- From a poker tournament, $5,000 or more
- From other wagers and the payout is 300 times the amount of the wager, $600 or more
The amount from Form W2-G or Form 1099 gets reported as other income on Line 21 of your income tax return. In order to deduct gambling losses, you must be able to itemize deductions. Gambling losses are subtracted under Other Miscellaneous Deductions on Schedule A, and you are allowed to deduct losses only to the extent of winnings. So if you won $20,000 but had losses of $25,000, you may only deduct $20,000 in losses.
Make sure you keep accurate records on your winnings, and if you gamble often, keep all the losing lottery and keno tickets and document your losses as much as possible.
The IRS recommends that you keep a gambling log to help document your activity. The records should include:
- The date and type of your specific wager or wagering activity.
- The name and address or location of the gambling establishment.
- The names of other persons present with you at the gambling establishment.
- The amount(s) you won or lost.
Having all of these records may seem like a lot of effort, just to report some losses. But, if you are chosen for an audit and cannot verify the losses you originally claimed, then you will not be able to claim them on your tax return.