Tax Articles

Are You A Casual Gambler?

Gambling winnings are taxable and are reported on your tax return as "Other income". Gambling losses are deductible on Schedule A as "Other Miscellaneous Deductions" up to the amount of your winnings. Gambling losses do not have to exceed 2% of adjusted gross income to get a tax benefit.

Here are seven tips to keep in mind if you're a casual gambler and plan on doing some gambling this summer:

  1. Gambling income includes winnings from lotteries, horse racing and casinos. It also includes cash prizes and the fair market value of prizes like cars and trips.
  2. If you win, you may get a Form W-2G, Certain Gambling Winnings, from the payer. The IRS also gets a copy of the W-2G. The payer issues the form depending on the type of game you played, the amount of your winnings and other factors. You’ll also get the form if the payer withholds taxes from what you won.>
  3. Report all your gambling winnings as income even if you don’t receive a Form W-2G. Report gambling winnings on Form 1040, line 21 as "Other income".
  4. Gambling losses are deducted on line 28 of Schedule A, Itemized Deductions (the section for "Other Miscellaneous Deductions").
  5. You may only deduct losses up to the amount of winnings. For example, if you win $2,000 and have $3,000 in gambling losses, you may only deduct a maximum of $2,000 on Schedule A. The excess $1,000 is not deductible and may not be carried over to the following year.
  6. Gambling losses do NOT have to exceed 2% of adjusted gross income to get a tax benefit.
  7. Keep gambling receipts and records including items such as, a gambling log or diary, receipts, statements or tickets.