Any money you win gambling or wagering is considered taxable income by the IRS. So is the fair market value of any item you win.
Gambling Winnings and Losses Tax Tips
Gambling winnings include, but are not limited to, money or prizes earned from:
- Casino games
- Slot machines
- Poker tournaments
- Betting pools
- Horse or dog races
- Off-track betting
Whether you are playing cards or the slots, it is important to know the rules about reporting gambling winnings and losses.The following rules apply to casual gamblers. Gambling winnings are fully taxable and must be reported on your tax return. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. For additional information, refer to Publication 525, Taxable and Nontaxable Income
The IRS recommends that you keep a gambling diary to help document your activity. The diary should include:
- The date and type of your specific wager or wagering activity.
- The name and address or location of the gambling establishment.
- The names of other persons present with you at the gambling establishment.
- The amount(s) you won or lost.
Here are seven things the IRS wants you to know about reporting what Lady Luck has sent your way.
- All gambling winnings are fully taxable.
- Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, poker tournaments and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips.
- A payer is required to issue you a Form W-2G if you receive certain gambling winnings or if you have any gambling winnings subject to federal income tax withholding.
- Even if a W-2G is not issued, all gambling winnings must be reported as taxable income. Therefore, you may be required to pay an estimated tax on the gambling winnings. For more information on paying estimated taxes, refer to IRS Publication 505, Tax Withholding and Estimated Tax.
- You must report your gambling winnings on Form 1040, line 21.
- If you itemize your deductions on Form 1040, Schedule A, you can deduct gambling losses you had during the year, but only up to the amount of your winnings. Your losses are not subject to the 2 percent of AGI Limitation.
- It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.
Winnings in the following amounts must be reported to the IRS:
- $600 or more at a horse track (if that is 300 times your bet)
- $1,200 or more at a slow machine or bingo game
- $1,500 or more in keno winnings
- $5,000 or more in poker tournament winnings
What Forms Do I Use to Report Gambling Winnings and Losses?
If you have gambling winnings, you must report them on Line 21 of Form 1040. You won’t be able to use Form 1040EZ or 1040A. But you can use software to prepare and efile your tax return with ease. The software walks you through the tax preparation process, helps you fill out the right forms, and checks for errors.Depending on the amount of your winnings, you may receive one or more Forms W-2G, which reports the amount of your winnings, as well as the amount of tax that was withheld, if any. You will need these forms to prepare your tax return. Remember that, even if you do not get a W-2G, you must report all gambling winnings.
If you have gambling losses to deduct, then you will need to use Schedule A to itemize your deductions. Gambling losses are entered on Line 28. You can do this on efile.com, as well.
For more information, refer to IRS Publications 525, Taxable and Nontaxable Income, and 529, Miscellaneous Deductions. Additional information can also be found in IRS Instructions for Forms W-2G and 5754, Certain Gambling Winnings & Statement by Person(s) Receiving Gambling Winnings. These publications are available below or ordered by calling 800-TAX-FORM (800-829-3676).