Is your vision of the ideal Friday night a trip to the casino with friends? If you play the ponies, cards or slots, your gambling winnings are taxable. You must report them on your tax return. If you gamble, these tips can help you at tax time next year:
1. Gambling income. Income from gambling includes winnings from the lottery, horse racing and casinos. It also includes cash and non-cash prizes. You must report the fair market value of non-cash prizes like cars and trips.
2. Payer tax form. If you win, the payer may give you a W-2G, Certain Gambling Winnings. The payer also sends a copy of the W-2G to the IRS. The payer must issue the form based on the type of gambling, the amount you win and other factors. You’ll also get a form W-2G if the payer must withhold income tax from what you win.
3. How to report winnings. You normally report your winnings for the year on your tax return as “Other Income.” You must report all your gambling winnings as income. This is true even if you don’t receive a Form W-2G.
4. How to deduct losses. You can deduct your gambling losses as an itemized deduction. The amount you can deduct is limited to the amount of the gambling income you report on your return.
5. Keep gambling receipts. You should keep track of your wins and losses. This includes keeping items such as a gambling log or diary, receipts, statements or tickets.
If gambling is something you do on a regular basis, we can help you decide whether to have tax withheld from your winnings, and how much. Call your tax professional today to schedule a free planning session!