Is the government entitled to a fair share of your gamble winnings? The simple and most truthful answer is yes! But can you use your losses as a write off for taxes? To avoid confusion, here is a detailed guide on casino winnings and taxes.
The rules and regulations for gambling vary across the globe. Depending on the country you live in, gambling can be 100% illegal or legal but with some legal bindings. Casinos, gaming and betting businesses pay their taxes on profits as any other company; moreover, players need to pay taxes on their winnings, especially if you’re a professional gambler.
For many of us, gambling is all about buying a lottery ticket and wait to claim the prize. But according to Internal Revenue Services, casino winnings are subjected to taxes even if you earn winnings from casual gambles, including raffles, casinos, games, pokers and sports betting.
Basics to Casino Gamble Money
The regulations for Federal income tax are the same across the country, but state laws vary. Typically, betting institutions and casinos require your social security number before you bet for big cash to help you file the winnings for taxes.
Typically, casinos from best online casino reviews deduct 25% before paying your winnings as it will be earmarked for US Government Treasury. Even if you win less than the limit, you’ve to report it on your federal taxes even then. However, you need to check the State Laws to determine the tax rules as Nevada didn’t tax gamble money for years.
Common Rules to Casino Winnings are:
Rule 1: Report Your Winnings
The basic rule for gambling is to account for all your gambling wins and report it to the government as income. But you mustn’t deduct the cost of your winnings. For instance, if you bought a lottery ticket for $40 and won $1000, then you can’t deduct that $40 when filing for tax.
Secondly, cash isn’t the only form of winning that is taxable. If you have won an item such as a laptop, TV or any other gadget, check its value in the fair market and report it for tax.
Rule 2: Fill the Form W-2G
On form 1040, an Individual Income Tax Return form, you need to file your cash and value prizes as other income to file for the taxes. If your winnings are big, you’ll automatically receive Form W-2G to report your winnings. The establishment will provide the form if you win:
- $600 or more on horse races
- $1200 or more on Bingo
- $1500 or more at Keno
- $5,000 in poker
However, table games such as blackjack and casinos are exempted from the W-2G rules, but they are still taxable incomes.
Rule 3: Deduct Your Losses
You cannot deduct the wager cost from your taxable winnings; however, you can deduct your gambling losses. The deduction rules are as follows:
- Itemize your gambling losses for a tax deduction
- You can’t apply standard deductions on your filing if it’s higher than the itemized amount.
- You are only allowed to deduct losses as much as the gambling income. So if you won $3000 at a Ruby Fortune Casino or other online game but lost more than that, the itemized deduction can be up to $3000. The remaining amount can’t be deducted from your taxable income.
Tax Rules for Professional Gambler
Are the tax regulations different for those who make a living out of gambling? Well, it’s a yes and no! Though you still can’t deduct losses that exceed your income, the tax regulations for professional gamblers are the same as that of any other day-to-day job.
You can file for Schedule C as a self-employed when claiming winnings in Form 1040, instead of marking it “other income.” As a self-employed individual, you can benefit from various other deductions, including the cost of:
- Magazines, periodicals and any other information tool
- Internet cost for online gambling
- And travel expenses to attend sports tournaments
You can even talk to a professional gamble tax attorney to increase your savings on tax deductions.