Full House of Tips for Reporting Gambling Winnings

Gambling can be an enjoyable hobby and pastime, but it also introduces unique considerations when tax season rolls around. Any gambling winnings are fully taxable and must be reported to the IRS—that includes casino games, sports betting, lotteries, raffles, horse races and more.

Even if you only gamble recreationally, you are still responsible for paying taxes on any jackpots, prizes or accumulated winnings throughout the year.

The good news is that the U.S. tax code also allows you to deduct gambling losses to help offset some of that tax liability from wins.

By keeping careful records, reporting accurately, and taking all allowed deductions, it is possible to make a winning hand when filing your gambling taxes every year. This guide will cover everything you need to know, including:

Tracking Wins & Losses for Tax Deductions

Gambling winnings at Playfina Casino online are taxed as “other income” on your tax return. The IRS requires you to keep meticulous records on gambling wins and losses throughout the year. This documentation should include:

• Date and type of gambling activity
• Name and address of gambling establishment
• Amount you wagered
• Amount you won or lost

Ideally, you should request an official W2-G form from the gambling operator or establishment for any slot machine, keno or bingo win of $1,200 or more. This applies to winnings from a single game, so you would not combine multiple smaller wins across different games to reach that threshold.

If you win a jackpot from a table game like blackjack, craps, roulette or poker that exceeds $5,000, the establishment is also required to issue you a W2-G for tax reporting. Make sure to get one before you leave the casino.

For wins below these thresholds or when gambling at informal establishments, you should keep your records. Save losing gambling tickets, official track or sports betting slips, lottery game receipts and casino kiosk records. Also make sure to get a receipt whenever you cash out chips from a table game.

Filing Gambling Winnings & Losses on Your Tax Return

You must report the full amount of all gambling winnings for the year on Line 21: Other Income of Form 1040. The establishment files the same information on your W2-G, so the IRS can cross-check your return.

Any gambling losses for the year can be deducted on Line 16: Other Itemized Deductions. However you cannot reduce your gambling income below $0 with losses. So if you lost money overall from gambling activities that year, your deductible amount would be capped at the amount you reported as Other Income.

You also cannot lump wins and losses together from different types of gambling. For example, if you won $5,000 on slot machines but lost $3,000 betting on horses, you would report the full $5,000 slot machine winnings on Line 21. You would then deduct just the $3,000 in horse racing losses on Line 16.

Tax Implications for Professional Gamblers

For casual hobby gamblers, winnings are taxed as “other income” and losses are itemized deductions. But for professional gamblers, there are some differences:

• Gambling income and losses are reported together on Schedule C as business income
• Business expenses become deductible beyond just losses
• Higher self-employment tax rates come into play

The IRS defines a professional gambler as anyone who gamble regularly with the intent of making a profit, rather than just as entertainment.

Reaching professional status typically requires you to gamble frequently and for substantial amounts. Simply reporting gambling income and losses on your taxes does not automatically make you a professional.

If you believe you may qualify as a professional gambler, make sure to discuss the unique implications with your tax advisor.

Common Mistakes to Avoid When Reporting Gambling Income

With the complexities of gambling taxes, issues can come up that lead to penalties, fees and additional owed tax if not addressed properly:

• Not reporting income – Even if no W2-G was issued, you must include all taxable gambling winnings every year. Failing to report income violates IRS rules and may trigger an audit if they have record of unclaimed winnings.
• No supporting documentation – Without proof of losses, your deductions will likely be denied. Save all documentation throughout the year to validate any claimed deductions.
• Unorganized records – Mixing wins and losses from different forms of gambling makes accurate reporting difficult. Keep thorough and organized records that clearly separate unique gambling activities.
• Improper deduction claims – You can only deduct losses up to the amount of reported gambling income—no further. Stick to this limit to avoid issues.

With some prudence about record keeping and reporting, managing taxes on gambling winnings does not need to be intimidating or overly complicated. Keep these best practices in mind to put yourself in a winning position when tax season comes around.