Reduce Your Tax Liability by Reporting Your Gambling Income & Losses

Is it too good to be true? 

Although it is difficult to determine the exact number of Americans who report gambling losses on their tax returns, we do know that many individuals are unaware of this tax deduction. As we are required to report winnings from all forms of gambling, we have the option of reporting losses up to the amount of our winnings.

When you win money from gambling, the casino or gambling entity will either provide you with Form W-2G or mail it to the address on file. Depending on the casino, you may receive the form in a variety of ways; if you do not receive the form, you are still required to report your gambling winnings on your tax returns.

Who Will Benefit from this Tax Deduction?

This tax dedication is intended for individuals who do not engage in gambling as a business or profession. Any form of wins and losses from lotteries, raffles, horse races, and casinos by an individual are fully taxable. By the end of this page, you will have a good understanding of what you can do about your gambling tax deduction.

What is a Win Loss Statement?

A Win/Loss statement estimates what an individual customer won or lost throughout a calendar year based on player monitoring data. It is one of the most essential conversations you have with the things you engage in on a regular basis, and it is a very crucial
document that your tax expert will require.

The Win/Loss (Tax) Statement you will receive is only an unconfirmed estimate of your slot and table game win/loss that you may compare to your own records and is not a replacement for the records needed by relevant State and Federal tax regulations. There are regulations that apply to casual gamblers who are not in the gaming trade or business. Winnings from gambling are completely taxable, and you must disclose them on your tax return. Winnings from lotteries, raffles, horse races, and casinos are examples of gambling revenue. It covers monetary rewards as well as the fair market value of prizes such as vehicles
and vacations.

Is it required to pay taxes on gaming winnings?

If you win $1200 in a slot machine jackpot, $1500 in keno, $5000 in a poker tournament, or $600 or more in “other” gambling winnings, the casino will record your Social Security Number and the amount of the victory and write it off as an expenditure. Casinos provide a win-loss statement for slot players that includes coin-in and coin-out amounts, but their player-tracking procedures for other forms of play differ. The casino will provide you with a copy of your gaming winnings on Form W-2G and will submit a copy to the IRS.

Can you claim your gambling losses from your taxes?

The usual location to disclose gambling losses is on Schedule A under miscellaneous deductions, although doing so has drawbacks. To begin, you must “qualify” for Schedule A itemized deductions. In order for Schedule A to be useful, your deductions must be more than the standard deduction.

Assume you are single, and your standard deduction for 2014 is $6,200. If your itemized deductions are less than this amount, filing a Schedule A will not help you. However, if you have enough mortgage interest, real estate taxes, or charitable donations to support itemizing your deductions, claiming a $1200 loss on Schedule A will assist you in reducing your tax liability.

If you don’t qualify for a Schedule A, or if you wish to report less than what’s on line 21 of Form W-2G, you’ll have to perform a lot more bookkeeping. W-2G wins are not the only ones that must be reported. As a result, you must keep a daily journal in which you record ALL of your earnings and losses every session, not simply sums of $1200 or more. The journal, like a tip diary, must be trustworthy. It’s a good idea to have bank records, ATM slips, and casino win-loss statements to back it up.

If you visit gambling resorts once or twice a year, make a record of your profits and losses for each trip. Make a dated note of your “buy in,” or the amount of cash you brought with you to play with, as soon as you arrive at your resort or hotel. Make a note of your “victory” when you check out of the hotel or resort (or loss). This marks the conclusion of your gambling session.

If you reside in a gambling city like Reno or Las Vegas, there is no way to define a gaming session because slot machines are available 24 hours a day in supermarkets and convenience shops, as well as bars and restaurants. If you report less than the amount of winnings recorded on Forms W-2G, be prepared for an IRS letter or an audit, and keep all records necessary for a day-to-day record of wins and losses. You should also be aware of state legislation that may differ from federal regulations. In such circumstances, having a tax professional assist you with the reportable amount is a wise plan.This alternative will need adhering to the scenario in the court case Shollenberger v. Commissioner T.C. memo 2009-306, as cited in Tax Materials, Inc.’s The Tax Book.

Expect casinos to withhold a part of your earnings for tax purposes only if state law mandates it. The majority of state legislation does not. Foreign winners and other exceptional circumstances are examples of exceptions.

There are two clear reasons why casinos will not voluntarily withhold taxes from your gaming winnings:

1. Withholding generates more administrative paperwork.
2. Withholding affects the flow of business (if the money is withheld, you will not be able to recover it).

At the time of the payment, you can request that gambling taxes be withheld from your winnings (possibly based on your marginal tax rate or higher). However, if your gains originate from the casino where you work, you should not seek withholding. (Some states and casinos permit casino employees to gamble on the premises where they work; others do not.) Having tax withholdings from gaming wins, whatever you go about it, might possibly save you hundreds or even thousands of dollars at tax time.