We’ve all seen or heard of professional gamblers winning big at poker tables or Churchill Downs, and maybe considered the tax liabilities that go hand in hand with such rewards. But even casual gamblers should take note of tax tips – because no matter the amount, if you win money or receive an award with a cash equivalent, it’s considered taxable income. Here are important things to note:
1.Remember gambling winnings are “income.” Whatever you win, whether its winnings from a casino or a car from a sweepstakes, is considered gambling income. With the case non-cash prizes, report the market value. 2.Fill out a Form W2-G – The Certain Gambling Winnings. Payers of gambling prizes issue these, and must report their own version – especially if they have to withhold income tax on your prize. You won’t also get one, but if you should, it is similar to a W-2 (get it, W2-G?) in that it reports earnings. 3.Report your winnings. Even if you don’t receive a W2-G, you must report these winnings on your W-2 in the “Other Income” section. 4.Deduct losses . You can include losses from gambling with your other itemized deductions, and ONLY if you itemize deductions. Itemized deductions are eligible expenses you can claim on federal returns that will decrease your taxable income. 5.Keep your receipts. Don’t find yourself panicking that you can’t remember how much you won on a college football game in Vegas – keep a record, and it will make reporting this taxable income easier.
Want more? Head over to Publication 525 – Taxable and Nontaxable Income – of the IRS.