If you live in Las Vegas, then you’re no stranger to the fortunes that can be made by Dame Fortune. While you may bask in the financial windfall, don’t expect for that feeling to last forever. That is correct, Uncle Sam wants a piece of the action! In other words, you will have to pay taxes on casino winnings. However, there are ways to maximize your earning potential. As a savvy gambler, it is necessary understand the limitations that can occur before and after winning to ensure that you keep as much as possible in your pocket. Think of this as knowing which tables are hot and what makes a solid bet.
At Book 2 Tax, we understand what’s in your best interest when you are trying to Find a qualified Tax Preparer. In this article, we’ll go over some of the frequently asked-about topics when it comes to taxes on casino winnings. When you’re finished, be sure to click on the link below to start putting your money where it belongs: in your wallet, not Uncle Sam’s.
Betting on the ponies, playing cards or can’t stop loving that the one-armed bandit? As a casual gambler, you should know that your gambling winnings are fully taxable and have to be reported on your income tax returns. If you do lose money gambling, you are entitled to deduct them but only up to the extent of your winnings.
Of course, there is always a way to get even with the house rules. Let’s take at some ways for you to keep the roulette wheel spinning for years to come:
The definition recognized by the IRS as gambling income includes - but is not limited to - winnings from lotteries, raffles, office pools, online poker tournaments, horse races, and just about every game within casinos. This definition includes cash winnings, but also extends into the realm of fair market value (FMV) of prizes like such as cars and all-expense paid trips to Tahiti. FMV is simply the value that you would obtain if you sold or purchased the prize from retailers or private parties. This is something to consider if you have a habit of winning large prizes. While it may be advantageous to keep that new Mercedes Benz in the driveway, it may make more sense for your taxes at the end of year to donate it to charity to reduce your tax burden.
Once you’ve figured out just what is and what is not gambling (when in doubt, it is probably gambling), the payer of your winnings has a legal obligation to issue you documentation as proof of your winnings. This is Form W-2G, Certain Gambling Winnings. Though you should keep your own records (see below), the W-2G is only issued based on the type of gambling that you engage in. Let’s take a look at some of the most common of these limits:
Furthermore, there’s some other paperwork that you’ll have to fill out to make things even with Uncle Sam. Reporting your winning is generally filled out on the “Other income” line of Form 1040, U.S. Federal Income Tax Return.
For losses, you are able to claim your gambling loss up to the amount of your winnings on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions.' You are required to report to the IRS the full amount of your winnings as income, claiming your allowable losses separately. While it may seem that it makes no different, you cannot simply reduce your gambling winnings from your gambling losses and report the difference. Instead, your records should show your winnings separately from your losses.
However, it is not always a straight-forward case for all taxpayers on just how they should file, so it would be a wise decision to Find A Tax Professional for Taxes on Casino Winnings to be absolutely sure of your best course of action.
If you were gambling to blow off steam and forget about all of the paperwork at the office, you may be in for a bit of a surprise. It is STRONGLY advised that you keep accurate records for tax purposes. If you’re going to deduct your gambling losses on your tax return, you are required to have all of the receipts, tickets, and documentation. This includes but is not limited to things such as a diary or similar record of your losses and winnings. IRS Publication 529, Miscellaneous Deductions can provide more details about what type of information you should write in your diary and the types of proof necessary for retaining your records. Failure to do so can result in an unnecessary audit process or tax penalties.
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