Are you a casual gambler? If you are, this article is for you!
Gambling winnings are fully taxable and must be reported as “Other Income” on your tax return (Form 1040 or 1040-SR). When you have winnings, you are issued Form W-2G from the place where your winnings occurred. This form shows your reportable winnings and any additional information you need to report on your return.
You also need to report winnings that aren’t monetary. If you win a laptop in a raffle, this also counts as other income. You must claim the item’s fair market value at the time you won it.
Gambling losses can also be deducted, but only if you itemize your deductions on Schedule A and you keep a record of your winnings and losses. Gambling losses are tax deductible only to the extent of your winnings. If you only claim the standard deduction, then you can’t reduce your tax by gambling losses. For example, if you have $6,000 in winnings but $8,000 in losses, you can only deduct up to $6,000 in losses. You can’t write off the remaining $2,000.
Things to keep in mind if you are claiming a loss, the IRS requires you to keep log of your winnings and losses. This includes lotteries, raffles, horse races, casino games, poker games, and sport betting. You need the date and type of gambling, and the name and address of the place you gamble.
Now, if you are a professional gambler, you still can’t deduct losses that exceed your winnings, but you can file Schedule C as a self- employed individual. The benefits of filing Schedule C are that you can also deduct other expenses like fees, supplies, utilities, and so on. The downside of this it that you will have to pay self-employment tax on your winnings.
ADKF understands how difficult it can be to keep up with tax laws. If you have any questions, please contact ADKF. We will gladly help you with any tax questions you might have.