Holiday decorations, gift exchanges, and sports gambling are in the air this time of year, with fantasy football players’ competitive tensions rising as we come closer and closer to the big game.
Are you feeling lucky? If so, you may be headed to the racetrack, casino or sports bar to make you bet, hoping to win big. However, you might be surprised to learn that Uncle Sam has his fingers crossed for your good fortune as well. That’s because you have to pay taxes on all gambling winnings.
Here are the rules.
Win at fantasy football or any other sports pool and your winnings will be considered income by the IRS. If you win at least 300 times and or the payoff is $600 or above, the gambling facility will ask for your social security number to send a form to the Internal Revenue Service.
You’ll also be subject to this reporting if you win $1,200 at slots or bingo or $1,500 at keno. Uncle Sam doesn’t have a place at the table during your weekly poker get-togethers with your buddies, but if you win $5,000 or more in a poker tournament the sponsor will be reporting your winnings to the IRS.
The news about taxes on gambling winnings doesn’t end there. The gambling institution is required to withhold 25% of your winnings as federal withholding tax. At tax time, for all reported winnings you’ll receive Form W-2G showing the amount you won and the taxes withheld. But even if you don’t receive a form reporting your winnings, you are still required to report all gambling winnings. In addition to gambling proceeds, you must report all other prizes you receive, including lottery winnings.
On the deductions front, you can’t directly offset your gambling winnings with your gambling losses, but you can include the losses as miscellaneous tax deductions on your tax return, if you itemize your tax deductions. If your losses exceed your winnings, the amount you deduct cannot exceed the total amount of your winnings.
Keep records of your gambling losses you claim on your tax return. You can do this by keeping a gambling log or hanging onto losing bet tickets, lottery tickets, and bingo cards.
Come tax filing time, don’t worry about knowing tax laws. TurboTax will ask you simple questions about you and give you the tax deductions and credit you’re eligible for based on your answers. If you have questions while doing your taxes you can connect to the TurboTax Live expansive network of credentialed CPAs, EAs, and Practicing Attorneys live via one-way video to get your tax questions answered. You can even have your tax return reviewed, signed, and filed.
Have fun, and I hope that Lady Luck showers you with wealth!