3 Tax Reasons for Why You Should Think Twice Before Betting on the Big Game

Read the Article

Are you ready for some football?

If so, maybe you’ve been thinking about putting a little money on the game, and if you are, it’s important to know that there may be tax implications. Like other sources of income, gambling winnings are fully taxable, but gambling losses are only sometimes deductible.

Gambling Winnings are Always Taxable

Gambling winnings are taxable and may be taxable on your state income tax return too. If your winnings came from an organization, such as a casino, they may issue IRS Form W-G, Certain Gambling Winnings. They work a lot like Form-1099s, and if you get a copy, it means that the IRS got one as well.

If the winnings came as a result of casual betting among friends or co-workers, you still have to report them. Or if the amount of the winnings are particularly large, you may also want to make an estimated tax payment to prevent a larger tax bill than expected when you file your taxes in April.

All Losses May Not Be Tax Deductible

Even though gambling winnings are taxable, you may be able to deduct your losses, but only up to your gambling winnings if you itemize your deductions.

For example, let’s say that you have $3,000 in gambling winnings for the year, but you also have gambling losses for the year totaling $2,000. The IRS will allow you to deduct the $2,000 in expenses from your gambling winnings, which will reduce your gambling winnings to just $1,000. However, let’s say that you had $3,000 in winnings but $5,000 in losses, that means that only $3,000 of the losses will be tax deductible.

Documenting Your Losses

If you tend to bet on games on a regular basis, you may have several losses, but if you pay those losses in cash, you may not have a paper trail documenting that they happened. Unless you can get written receipts from all of your betting partners, or place your bets by check, it’s unlikely that you’ll have anything to document your losses with.

The best that you can do is to keep careful records of your gambling losses, and then use that as a basis to take your tax deduction, but don’t worry about knowing these tax laws. TurboTax will ask you simple questions about you and give you the tax deductions and credits you are eligible for based on your answers.

Leave a Reply