Tax Tips for Gambling Winnings and Losses

poker chips
By Ethan Wingrove, Senior Associate
 
From casino gaming to online sports betting, there are plenty of ways to place a bet in hopes of winning big money! But before you spend all of your winnings, here are some tips on how to report your gambling winnings and losses on your taxes. 

Winnings and Losses Must Be Reported Separately

For example, assume you won $1,000 on a good hand at the casino, but you lost $600 in other games. You cannot reduce your winnings ($1,000) by your gambling losses ($600) and report the difference ($400) as income. You must report the entire $1,000 winnings as income and you are able to deduct the $600 loss if you choose to itemize deductions.
 
Winnings are reported on Schedule 1 as “Other Income”. Losses are reported on Schedule A as Itemized Deductions. It is important to note that you can only deduct losses up to the amount of winnings.

Withholding May Be Required

If your winnings exceed $5,000 and the payout is at least 300 times the amount of your bet, the IRS requires the payer to withhold 24% of your winnings for federal income taxes. State taxes may also be withheld depending on the location.

You May Receive an IRS Form W-2G to Report Winnings

You should receive a W-2G from the payer if you win:
 
• $600 or more if the amount is at least 300 times the wager (the payer has the option to reduce the winnings by the wager).
• $1,200 or more (not reduced by the wager) in winnings from bingo or slot machines
• $1,500 or more in winnings (reduced by the wager) from Keno
• More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament.
 

You Must Report ALL of Your Winnings – No Matter How Small

Whether your winnings come from a casino or an office pool, all gambling winnings must be reported on your tax return as “Other Income” on Schedule 1 (Form 1040). Even non-cash prizes such as cars and vacations must be reported as income based on their fair market value.

Keep Good Records of Your Wins and Losses

Gambling may put you at higher audit risk. If you receive a W-2G form because of your winnings, the IRS receives a copy and expects you to claim your winnings on your return. Also, deducting large gambling losses can catch the attention of the IRS. 
 
The IRS suggests keeping a record of your gambling activities that includes:
 
• Dates and types of wagers or gambling activities
• Name and address of gambling establishment
• Names of other people with you at the establishment
• Amounts won or lost
 
If you have any questions about how to handle your gambling winnings or losses, please contact Ethan Wingrove or any member of the Baker Holtz staff at 616-458-1835.