When we decide to make a trip to the casino or to a racetrack on the spur of the moment or on a planned adventure, most people do not spend any time considering the tax implications involved if they actually win. Gambling winnings and losses include raffles, track races, sports betting, lotteries, all casino games, poker games and prizes – the tax burden of which can be significant.
The amount won and on what game it is won determine if the casino has to fill out a W2-G to report the amount to the IRS or not. It can withhold taxes to send into the IRS based on a percentage of the winnings. Some circumstances allow the winner to not have withholding and should be discussed with the casino on a case-by-case basis. The following amounts for each game requiring a W2-G to be filled out is as follows:
$600 or more won at a racing track
$1,200 or more if at a slot machine or bingo game
$1,500 or more if won at Keno
$5,000 or more if won at a poker tournament
The gambler will have to provide their personal information and ID to the casino for the filling out of the W2-G.
Winnings from games such as roulette, craps, baccarat, blackjack and other table games usually do not require the filling out of the W2-G. Of course, even if the W2-G is not required, the IRS still considers all gambling winnings to be income. If you win prizes, rewards or lotteries throughout the whole year, even if you do not receive a tax document reporting it, it is still considered income by the IRS and most state taxing authorities. Gambling and all other wagering losses throughout the whole year can be used as a deduction if you itemize on your personal tax return. The new TCJA tax law did away with most of the miscellaneous deductions on the itemized deduction form, but preserved the gambling losses deduction. Since the standard deduction has almost doubled, these losses may have to be significant to matter. This article only applies to recreational gamblers. The rules for professional gamblers are beyond the scope of this article.
As with everything associated with taxes and record keeping, it is always good to develop good record keeping habits. Keeping accurate logs and diaries of the amounts won and lost throughout the whole year, the name and address of the casino, the date and time, the amount wagered, games played, cancelled checks or lottery tickets, and any other receipts that show proof, can make the difference between a deduction that is allowed or not. As a member of a casino club you can get a print out of your wins and losses incurred while gambling with your card, for the whole year. When not using your club card, it is just a matter of getting into the habit of keeping the log or diary. Since most people lose more than they win when gambling, this is usually not that much of an issue. However, for the lucky ones (or skilled?) that do win or win big, these records of losses can be very important. When it comes to how much we pay in taxes, we owe it to ourselves, and to our heirs – if any – to lessen our tax burden as much as possible. Remember, there is a difference between tax avoidance, and tax evasion. And, if you do not care about throwing money around, hey, just throw some my way while you’re at it. QCBN
By Ernie L Gallardo, EA
Ernie L Gallardo, EA is an Enrolled Agent with 15 years of tax experience in the Prescott area.
A member of the American Society of Tax Problem Solvers (ASTPS), and the National Association of Tax Professionals (NATP). Gallardo is the owner of Tycho Tax Services. He can be reached by phone/text 24/7 at 928-899-2434, email at info@TychoTaxServices.com, or at TychoTaxServices.com, and at PO BOX 112, Kirkland, AZ 86332.
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