Now that casinos are up and running across Ohio, you may have spent a weekend evening at one of the casinos. You may have even hit a jackpot. Did you know that there is a tax on gambling winnings? Even if you do not receive a Form W-2G, you must report tax on gambling winnings.
Porter Law Office, LLC frequently advises taxpayers on gambling winnings tax issues. Generally, an amateur gambler must report all gambling winnings on their federal income tax return. Gambling losses may only be deducted to the extent of winnings.
Below are five basic tax tips about gambling winnings taxes.
Tip 1: Tax on Gambling Winnings Include Cash and Prizes
Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips. There is no minimum requirement for reporting your gambling winnings. You must report all your gambling winnings as income on your federal income tax return. This is true even if you do not receive a Form W-2G.
Tip 2: Payer Issuance of Form W-2G
If you receive a certain amount of gambling winnings or if you have any winnings that are subject to federal tax withholding, the payer is required to issue you a Form W-2G, Certain Gambling Winnings. The payer must give you a W-2G if your gambling winnings are the following:
- $1,200 or more in gambling winnings from bingo or slot machines;
- $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
- More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
- $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or
- Any other gambling winnings subject to federal income tax withholding.
For more information, please refer to the instructions to Form W-2G.
Tip 3: Report Gambling Winnings on “Other Income” Line of Form 1040
As a recreational gambler, you will generally report all gambling winnings on the “Other income” line of Form 1040, U.S. Federal Income Tax Return.
Tip 4: Claiming Gambling Losses
Under Internal Revenue Code Section 165(d), a casual gambler can claim gambling losses up to the amount of gambling winnings on Schedule A, Itemized Deductions. The correct category is “Other Miscellaneous Deductions.”
Practice Pointer: It is very important to note that as a recreational gambler, you must report the full amount of your winnings as income then claim your allowable losses separately. Thus, you cannot reduce your gambling winnings by your gambling losses and report the difference.
Finally, you must keep records of both your gambling winnings and losses. These records should be kept separate so you do not commingle your gambling winnings with your losses.
Tip 5: Gambling Loss Record Keeping
If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings. For more information, please review IRS Publication 529, Miscellaneous Deductions, for more details about the type of information you should write in your diary and what kinds of proof you should retain in your records.
Columbus Tax Attorney | Ohio Tax Lawyer
Contact Porter Law Office, LLC
Porter Law Office, LLC represents amateur and professional gamblers with tax disputes before the IRS. If you have had tax on gambling winnings and are in a dispute with the IRS regarding your gambling activities, or if you have questions on the taxation of gambling losses, contact Porter Law Office, LLC today for a free consultation.