How to Report Gambling Winnings and Losses for Tax Purposes | Pocket Sense
For information on withholding on gambling winnings, refer to PublicationTax Withholding and Estimated Tax. Whether you are an amateur or a professional gambler, you must adequately document the amount of your losses in order to claim your rightful gambling-loss deductions.
How to Report Gambling Winnings and Losses for Tax Purposes by Contributor ; Updated July 27, Gambling winnings are included as income for tax purposes, and gambling losses may be deductible on your tax return if you itemize your deductions.
Also, nonresident aliens of the United States can't deduct gambling losses. Both are available at IRS.
Types of gambling income include money won in casinos, lotteries, raffles and any other legal or illegal gambling activities. Step 2 Calculate your total gambling income by adding together all sources of gambling winnings including, but not limited to, amounts reported to you records for gambling losses Form W-2G, raffle prizes and lottery winnings.
Of course, the IRS gets a copy too, so you better make sure the gross gambling winnings reported on page 1 of your Form or on Schedule C if you are a professional gambler at least equal the amounts reported on the Forms W-2G. If you won a non-cash prize, the fair market value of the item is shown as income on Form W-2G. In Dire Circumstances No Recordkeeping May Be Required In a decision, the Tax Court allowed a taxpayer to use a common-sense approach to establish that his gambling losses, for which he had no records, were more than enough to offset his gambling winnings as reported on Forms W-2G.
You also cannot deduct gambling losses that exceed your gambling winnings.
Include any winnings reported to you on Form W-2G, which is also supplied to the IRS by the gambling establishment that sends it to you. You cannot reduce your winnings by your losses and report the difference. You should also keep a diary or similar record of your activity.
You must report your winnings as income and claim your allowable losses separately. Tax Guide for Aliens, and PublicationU. Also, see PublicationMiscellaneous Deductions. Recordkeeping Issues Technically speaking, an amateur gambler must report the full amount of each and every win on the miscellaneous income line on page 1 of Form To learn more about this topic, see PublicationTaxable and Nontaxable Income.
You cannot use any other personal income tax returns, such as Form EZ, to report winnings from gambling. Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos.
While most gamblers end up empty-handed, a select few win big. If the casual slot player then reports the sum total of the net winnings from all winning sessions as gross income on page 1 of Form and keeps track of the sum total of the net losses from all losing sessions for purposes of applying the losses-cannot-exceed-winnings limitation to his Schedule A itemized deduction, the IRS will consider that close enough to the theoretically required recording of each win or loss from each spin of the slot machine.
This amount may not exceed your declared gambling winnings on line 21 of IRS Form Step 6 Include any taxes withheld on your winnings, as shown in Box 2 of Form W-2G, in your total tax payments section of your tax return Form The deduction is limited to the amount of your winnings.
Refer to PublicationU. This includes items such as receipts, tickets or other documentation. Nonresident Aliens If you're a nonresident alien of the United States for income tax purposes and you have to file a tax return for U. Since you must report gambling winnings separately from the deduction for gambling losses, you should record them in separate places in your log book to make it easier to summarize at year end.
The amount of losses you deduct can't be more than the amount of gambling income you reported on your return. Step 4 Deduct the amount of your gambling losses as an itemized deduction on Schedule A of Form Even folks who attempt to keep good records will probably only record their daily net winnings and daily net losses.
Readers, what are your practices when it comes to keeping gambling records? You cannot subtract your losses from your winnings and report the net difference in income. The agency has different rules for amateurs and professionals, as Tax Guy Bill Bischoff previously reported.
You must report all your gambling winnings as income on your federal income tax return. Include the type of wager and be specific. Step 5 Keep an adequate record of your winnings and losses that shows the dates and the types of wagering activities, the location where it took place, persons with you at the time and the amounts that you won or lost.
It also includes cash and the fair market value of prizes you receive, such as cars and trips. These amounts must be added to gambling winnings in Step 3. Step Verify your gambling losses with documents such as originals or copies of lottery and KENO tickets purchased, racing and other wagering tickets, credit card records, canceled checks, bank withdrawal records, records of casino slot machine numbers and table numbers where you gambled.
Nonresident Alien Income Tax Return.
Individual Income Tax Return. In other words, the determination of the net win or loss amount can be made when the gambler redeems his tokens at the end of each session or determines that he lost all the tokens he started off with at the beginning of that session.
Your records should show your winnings separately from your losses. Recordkeeping To deduct your losses, you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses. This is true even if you do not receive a Form W-2G.
Topic No. Gambling Income and Losses | Internal Revenue Service