Gambling Winnings and Losses
July 8, 2008
Your summer vacation may mean a trip to the casino or the
racetrack. What will you owe Uncle Sam if Lady Luck happens
to be on your side?
Gambling winnings are fully taxable and must be reported on
your tax return.
You must file Form 1040 and include all of your winnings.
Gambling income includes, among other things, winnings from
lotteries, raffles, horse races, and casinos. It includes
cash winnings and also the fair market value of prizes such
as cars and trips. You can find more information in
Publication 525, Taxable and Nontaxable Income.
Anyone who pays your winnings or awards you a prize is
required to issue you a Form W-2G if your winnings are
subject to Federal income tax withholding or if your
winnings are over a certain amount.
However, all gambling winnings must be reported regardless
of whether any portion is subject to withholding. In
addition, you may be required to pay an estimated tax on
your gambling winnings. For information on tax withholding
on gambling income, refer to Publication 505, Tax
Withholding and Estimated Tax.
If your luck isn’t always so good, you may deduct gambling
losses. Losses may be deducted only if you itemize
deductions and only if you also have gambling winnings.
Claim your gambling losses as a miscellaneous deduction on
Form 1040, Schedule A. But remember, the losses you deduct
may not be more than the gambling income you report on your
return.
Even though you may be on vacation, if you want to deduct
losses when you file your return next spring, it is
important to keep an accurate diary or similar record of
your gambling winnings and losses right now.
To deduct your losses, you must be able to provide receipts,
tickets, statements or other records that show both your
winnings and losses.
For more information, refer to Publication 529,
Miscellaneous Deductions. The publication is available at
IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).
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