Have you been feeling lucky lately? Did you score some money in a casino or lottery? If so, with April’s tax deadline approaching, you may now be wondering how those winnings will affect your tax return.
The IRS considers gambling income from lottery, horse races, raffles, and casino games as taxable income, including cash winnings and the market value of non-cash prizes such as cars or vacations. In some instances, gambling winnings from bingo, keno and slot machines are also reportable income for tax purposes, as indicated below:
- Bingo winnings of $1,200 or more from one bingo game without reduction for the amount wagered. All winnings received from all wagers made during one bingo game are combined.
- Keno winnings of $1,500 or more from one keno game reduced by the amount wagered on the same keno game. All winnings received from all wagers made during one keno game are combined.
- Slot machines winnings of $1,200 or more from one slot machine play without reduction for the amount wagered.
If you receive gambling winnings, you may receive a Form W-2G for that income. Be sure to retain this document and any other tax documents for your tax preparer! You’ll also need to let your tax preparer know about any other winnings that aren’t included on the W-2G, as that income may also be taxable and need to be reported.
Gambling Losses
Not so lucky? Losing money is no fun, but on the bright side you may be able to deduct the losses against your winnings. Losses are deductible as an itemized deduction on Schedule A. If you don’t have enough deductions to itemize, the gambling losses won’t do you any good. Even if you can itemize, your deduction is limited to the amount of your current year winnings.
Be sure to keep accurate records, including lottery tickets, casino records and any other records that show the amounts of your winnings and losses. If no independent documentation is available, you may be able to convince the IRS of your losses by keeping a diary or logbook. You’ll have a better chance of claiming your losses if the diary is detailed and prepared at the time you incur the losses.
If you have income from gambling, it’s important to work with a tax professional to make sure your income and deductions are reported correctly! You’re in luck—Padgett’s nationwide network of CPAs and EAs are here to help. Find an office near you today.