How Do I Report Casino Winnings On My Taxes
- How Do I Report Casino Winnings On My Taxes Due
- How Do I Report Casino Winnings On My Taxes Returns
- Taxes On Casino Winnings Calculator
- Casino Winnings And Losses Taxes
- How Do I Report Casino Winnings On My Taxes Owed
- You are required to report your gambling winnings, including lottery winnings, on your annual tax return. If you win a lottery and you win over a certain amount, the lottery will issue you a Form W-2G, which you'll use to add the winnings to your 1040. The Form W-2G reports your winnings and also reports whether any taxes were withheld before.
- If you win any money gambling, you should report it on your federal income tax return. It doesn’t matter whether you spent $20 for a scratch-off ticket and only won $5. You’re supposed to.
Most gamblers hope to win money when they visit a casino, but many fail to think about the taxes they would have to pay on their winnings. Meet George and Frank, two American friends who spend a weekend gambling at the Las Vegas Bellagio. George wins $200 playing video roulette. Frank wins $1500 on a quarter slot machine (Play here). Both men make some significant financial mistakes that could get them into trouble with the IRS.
To report your gambling losses, you must itemize your income tax deductions on Schedule A. You would typically itemize deductions if your gambling losses plus all other itemized expenses are greater than the standard deduction for your filing status. If you claim the standard deduction. Reporting Gambling Profits and Loss on Your Taxes. Gambling Losses Can Be Deducted on Schedule A. If you itemize your deductions, you can deduct your gambling losses for the year on Schedule A. However, you can only deduct your loss up to the amount you report as gambling winnings. Depending on how much you won during the year, you may receive a Form W-2G listing your gambling winnings. But even if you don’t receive the form, you’re still required to report all your winnings as “other income” on your tax return.
Mistake # 1 - Frank Fails to Pay Taxes on His Winnings
Before leaving the casino, Bellagio officials ask Frank to supply his Social Security number and fill out a W - 2G stating his $1500 winnings. When tax time rolls around, Frank forgets about the W – 2G and does not report the $1500 on his tax forms.
Could Frank Get in Trouble?
If Frank gets audited, he could indeed get in trouble with the IRS for failing to report his gambling income. Federal law mandates that slot machine winnings over $1200 must be reported to the IRS. The law also requires horse racing winnings over $600 and keno (click here) winnings over $1500 to be reported. Frank's legal obligation does not end with the W - 2G he filled out at the casino; he must also claim his winnings on Line 21 of his 1040. Failing to do this could result in stern penalties from the IRS.
What About George?
Bellagio officials did not ask George to fill out a W – 2G because his $200 earnings fell below the IRS threshold. Technically, however, he is supposed to claim his $200 winnings on Line 21 of his 1040 just like Frank. Unlike Frank, George stands little chance of getting caught if he fails to do this because there is no paper trail documenting his jackpot (read more). The only punishment George is likely to suffer is the discomfort of a guilty conscience.
If your winnings surpass the predetermined threshold, casino proprietors are required by law to have you fill out a W – 2G which reports your extra income. If you fail to submit this information to the IRS at tax time, government officials could catch a whiff of your paper trail and come after you. If your casino winnings do not surpass the predetermined threshold, you are still required by law to report the money, but without written evidence, the IRS stands little chance of catching you in your dishonesty.
Mistake # 2 - Frank Itemizes His $4000 Gambling Loss and Cheats Himself Out of the $5,950 Standard Deduction
Frank carefully records his losses at the Bellagio in a small notebook he keeps in his pocket. At the end of the weekend, he calculates a $4000 loss. When tax time rolls around, Frank itemizes this $4000 loss and feels like a tax-savvy gambling superstar. Unfortunately, the $4000 is Frank's only itemized deduction for the year and he's actually cheated himself out of a significant chunk of money. If Frank had bothered to do some research, he would have known that the standard deduction in 2012 is $5950. By itemizing only his $4000 loss at the Bellagio, Frank cheated himself out of an additional $1950 deduction.
The Moral of the Story
You can itemize gambling losses on your tax forms in order to recoup some of your lost money, but always find out what the standard deduction is first. You will only come out ahead if your itemized deductions add up to more than the standard deduction.
Mistake # 3 - George Itemizes His Gambling Losses, Which Are Greater Than His Winnings, and Gets in Trouble
After examining the pocketful of ATM receipts he accumulated while at the Bellagio, George realizes that although he won $200, he lost a total of $800. When tax time rolls around, George reports the $800 loss under the miscellaneous deductions section on Schedule A. He also reports his $200 winnings on Line 21 of his 1040. Unfortunately, George does not realize that deducted gambling losses cannot legally exceed gains. He gets audited and fined for failing to comply with this IRS regulation. It is perfectly acceptable to deduct your gambling losses, but you must also report your winnings. On top of that, your claimed losses may not exceed your stated winnings. George can legally claimed a $200 loss because he won $200, but he cannot legally claim an $800 loss in this scenario.
Mistake # 4 - George Fails to Document His Gambling Activities in an IRS-Approved Fashion
George is notified by the IRS that he is being audited and needs to provide legal documentation of the wins and losses he accumulated at the Bellagio. He digs through his suitcase, reassembles his collection of ATM and players card receipts, and submits these slips of paper to the IRS in a manila envelope. IRS officials reject his envelope, stating that this piecemeal form of documentation is unacceptable.
Conclusions
It is wise to track your casino expenditures, but saved receipts are not enough in the case of an IRS audit. Wins and losses should be logged in a notebook which includes the location, date, and amount of money won or lost. Game stubs are also acceptable documentation, but ATM and players club receipts are not.
All Americans must report gambling winnings to the IRS, regardless of what state or country they are in when they win. Gambling proprietors are required by law to report guest winnings that exceed certain predetermined amounts to the IRS. If you don't report your winnings and are audited, you could get in trouble.
Citizens are permitted to claim gambling losses on the miscellaneous deductions section in Schedule A, but losses may not exceed winnings. If you're thinking about itemizing gambling losses on your taxes, experiment with different deduction scenarios to see which will give you the biggest benefit.
Finally, keep track of your wins and losses in a detailed notebook. If you do get audited, IRS officials will only accept certain forms of financial documentation.
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Do you like to gamble? If so, then you should know that the taxman beats the odds every time you do. The Internal Revenue Service and many states consider any money you win in the casino as taxable income. This applies to all types of casual gambling – from roulette and poker tournaments to slots, bingo and even fantasy football. In some cases, the casino will withhold a percentage of your winnings for taxes before it pays you at the rate of 24 percent.
Casino Winnings Are Not Tax-Free
Casino winnings count as gambling income and gambling income is always taxed at the federal level. That includes cash from slot machines, poker tournaments, baccarat, roulette, keno, bingo, raffles, lotteries and horse racing. If you win a non-cash prize like a car or a vacation, you pay taxes on the fair market value of the item you win.
By law, you must report all your winnings on your federal income tax return – and all means all. Whether you win five bucks on the slots or five million on the poker tables, you are technically required to report it. Job income plus gambling income plus other income equals the total income on your tax return. Subtract the deductions, and you'll pay taxes on the resulting figure at your standard income tax rate.
How Much You Win Matters
While you're required to report every last dollar of winnings, the casino will only get involved when your winnings hit certain thresholds for income reporting:
How Do I Report Casino Winnings On My Taxes Due
- $5,000 (reduced by the wager or buy-in) from a poker tournament, sweepstakes, jai alai, lotteries and wagering pools.
- $1,500 (reduced by the wager) in keno winnings.
- $1,200 (not reduced by the wager) from slot machines or bingo
- $600 (reduced by the wager at the casino's discretion) for all other types of winnings but only if the payout is at least 300 times your wager.
Win at or above these amounts, and the casino will send you IRS Form W2-G to report the full amount won and the amount of tax withholding if any. You will need this form to prepare your tax return.
How Do I Report Casino Winnings On My Taxes Returns
Understand that you must report all gambling winnings to the IRS, not just those listed above. It just means that you don't have to fill out Form W2-G for other winnings. Income from table games, such as craps, roulette, blackjack and baccarat, do not require a WG-2, for example, regardless of the amount won. It's not clear why the IRS has differentiated it this way, but those are the rules. However, you still have to report the income from these games.
What is the Federal Gambling Tax Rate?
Standard federal tax withholding applies to winnings of $5,000 or more from:
- Wagering pools (this does not include poker tournaments).
- Lotteries.
- Sweepstakes.
- Other gambling transactions where the winnings are at least 300 times the amount wagered.
If you win above the threshold from these types of games, the casino automatically withholds 24 percent of your winnings for the IRS before it pays you. If you cannot provide a Social Security number, the casino will make a 'backup withholding.' A backup withholding is also applied at the rate of 24 percent, only now it includes all your gambling winnings from slot machines, keno, bingo, poker tournaments and more. This money gets passed directly to the IRS and credited against your final tax bill. Before December 31, 2017, the standard withholding rate was 25 percent and the backup rate was 28 percent.
The $5,000 threshold applies to net winnings, meaning you deduct the amount of your wager or buy-in. For example, if you won $5,500 on the poker tables but had to buy in to the game for $1,000, then you would not be subject to the minimum withholding threshold.
It's important to understand that withholding is an entirely separate requirement from reporting the winning on Form WG-2. Just because your gambling winning is reported on Form WG-2 does not automatically require a withholding for federal income taxes.
Can You Deduct Gambling Losses?
If you itemize your deductions on Schedule A, then you can also deduct gambling losses but only up to the amount of the winnings shown on your tax return. So, if you won $5,000 on the blackjack table, you could only deduct $5,000 worth of losing bets, not the $6,000 you actually lost on gambling wagers during the tax year. And you cannot carry your losses from year to year.
The IRS recommends that you keep a gambling log or spreadsheet showing all your wins and losses. The log should contain the date of the gambling activity, type of activity, name and address of the casino, amount of winnings and losses, and the names of other people there with you as part of the wagering pool. Be sure to keep all tickets, receipts and statements if you're going to claim gambling losses as the IRS may call for evidence in support of your claim.
What About State Withholding Tax on Gambling Winnings?
There are good states for gamblers and bad states for gamblers. If you're going to 'lose the shirt off your back,' you might as well do it in a 'good' gambling state like Nevada, which has no state tax on gambling winnings. The 'bad' states tax your gambling winnings either as a flat percentage of the amount won or by ramping up the percentage owed depending on how much you won.
Taxes On Casino Winnings Calculator
Each state has different rules. In Maryland, for example, you must report winnings between $500 and $5,000 within 60 days and pay state income taxes within that time frame; you report winnings under $500 on your annual state tax return and winnings over $5,000 are subject to withholding by the casino due to state taxes. Personal tax rates begin at 2 percent and increase to a maximum of 5.75 percent in 2018. In Iowa, there's an automatic 5 percent withholding for state income tax purposes whenever federal taxes are withheld.
State taxes are due in the state you won the income and different rules may apply to players from out of state. The casino should be clued in on the state's withholding laws. Speak to them if you're not clear why the payout is less than you expect.
How to Report Taxes on Casino Winnings
You should receive all of your W2-Gs by January 31 and you'll need these forms to complete your federal and state tax returns. Boxes 1, 4 and 15 are the most important as these show your taxable gambling winnings, federal income taxes withheld and state income taxes withheld, respectively.
You must report the amount specified in Box 1, as well as other gambling income not reported on a W2-G, on the 'other income' line of your IRS Form 1040. This form is being replaced with a simpler form for the 2019 tax season but the reporting requirement remains the same. If your winnings are subject to withholding, you should report the amount in the 'payment' section of your return.
Casino Winnings And Losses Taxes
Different rules apply to professional gamblers who gamble full time to earn a livelihood. As a pro gambler, your winnings will be subject to self-employment tax after offsetting gambling losses and after other allowable expenses.