If you’re looking to have a good time, the team at Stones Gambling Hall knows firsthand how fun gambling can be. That’s why almost 50% of U.S. adults say they participate in some form of gambling annually. However, you may be wondering how Uncle Sam fits into the picture. Questions arise, such as, “Do you have to pay taxes on gambling winnings?” Keep reading along for some expert advice.
What Is Casual Gambling?
The Internal Revenue Service (IRS) says that casual gambling includes income from winnings like casinos, horse races, raffles and lotteries. This also features cash winnings and the fair market value of prizes, including cars and trips.
According to the IRS, these winnings are fully taxable and must be reported as income on your tax return. Here’s another important rule: You cannot subtract the cost of gambling from your winnings or “net” your winnings and losses.
For example, if you win $840 from a horse race but spent $40 to bet, your taxable winnings are $840, not $800 after subtracting your $40 wager.
Form W-2G on Big Wins
The IRS also says you must report all gambling winnings on Form 1040. If you’ve won big, you will also be required to fill out a W-2G form.
Here are the tax code rules:
- $600 or more on a horse race (if the win pays at least 300 times the wager amount)
- $1,200 or more at bingo or on a slot machine
- $1,500 or more at Keno
- $5,000 or more in a poker tournament
Another question many gamblers have is this one: Do senior citizens have to pay taxes on gambling winnings?
The answer is yes because these winnings are taxable income, no matter the age of the gambling adult. Whatever you do, enjoy gambling, but keep excellent records and receipts from your winnings to track them for tax purposes.
Gambling Losses and Their Role
Win or lose, Uncle Sam wants it reported on record. Many people aren’t sure how the system works when it comes to deducting their gambling losses. They may wonder, “Can you write off your gambling losses?” Or, they ask, “How do I prove gambling losses on my taxes?”
If you itemize your deductions on your Form 1040, Schedule A, you can deduct your gambling losses. The IRS requires you to provide receipts, tickets, statements, or other records showing the totals of your winnings and losses.
However, the amount of losses you deduct cannot be more than the amount of gambling income reported.
Win or Lose, Uncle Sam Always Knows
Every tax professional will tell you to play by the rules because Uncle Sam is watching. Casinos and other payers are required to report your winnings if they exceed a certain dollar threshold.
If you are thinking about how to avoid taxes on gambling winnings, just note that the IRS always wins. For instance, if you failed to provide the payer with your Social Security number, your winnings will be subject to backup withholding at a 24% rate. The IRS will collect this amount from the gaming facility of the amount held back from your winnings.
The IRS is going to know when you win big because it’s considered taxable money. If you want to lower that tax, you will need proof of the deductions you can claim against this income.
The IRS Wants a Token of Your Good Fortune
Have a ball gambling but stick to these three simple rules:
- Gambling income is taxable
- Maintain records of your losses
- Net losses do not carry forward.
Ready to test your luck with your tax return? Visit Stones Gambling Hall today!
