Whether you roll the dice, play cards or bet on the ponies, all your winnings are taxable. The income is reported on your tax return in the year you earn it.
Here are some tax tips for the casual gambler:
1. Gambling income 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.
2. If you win, you may receive a Form W-2G, Certain Gambling Winnings, from the payer. The form reports the amount of your winnings to you and the IRS. The payer issues the form depending on the type of gambling, the amount of winnings, and other factors. You’ll also receive a Form W-2G if the payer withholds federal and/or income tax from your winnings.
3. You must report all your gambling winnings as income on your federal and state income tax returns. This is true even if you do not receive a Form W-2G.
4. You must report your winnings on the “Other Income” line of your Form 1040, U. S. Individual Income Tax Return.
5. 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.
6. You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or other documentation. You should also keep a diary or similar record of your activity. Your records should show your winnings separately from your losses.
For more information about reporting gambling activity on your tax return, contact your tax preparer today.