Gambling Losses Deduction Tax Reform
- Gambling Losses New Tax Plan
- Gambling Tax Deductions United States
- Gambling Loss Deduction Tax Reform
- Oklahoma State Gambling Tax Deductions
Reporting gambling winnings and claiming gambling losses. Taxpayers who itemize can deduct gambling losses up to the amount of gambling winnings. They can use the Interactive Tax Assistant to find out more about reporting gambling winnings and losses next year. Publication 5307, Tax Reform: Basics for Individuals and Families PDF.
- So with gambling losses now it's just another thing to add, because I'm itemizing anyway. But if those go away, with the doubling of the standard deduction I wouldn't necessarily need to itemize if I didn't have gambling losses. For us while the mortgage interest is a chunk of change it's all the other taxes that are the kicker.
- Limitations on loss deductions The amount of gambling losses you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000,.
Until a few months ago, sports betting had to be done “under the table” since it was prohibited by law in all states except Nevada. This changed in May when the Supreme Court reversed the law that prohibited sports betting in physical locations like casinos.
While it’s easy to see why many sports fans are excited to be able to casually (and legally) bet on their favorite teams, many states and the IRS have also been keenly interested in this decision from a tax perspective due to the fact that the annual value of illegal sports wagers is about $150 million. So whether you are an infrequent gambler or you take gambling more seriously, the following are some tax implications you need to be aware of if you participate in sports betting, lotteries, and other gambling activities
What casual gamblers need to know
- In general, if you win $5,000 or more at a gambling venue, the proprietor of the venue will withhold federal taxes at the current tax rate of 24 percent.
- You may also be taxed at the betting venue if your win is 300 times the original bet, even if it is less than the $5,000 threshold. However, you can’t assume that is the only tax you will owe on your winnings. There may also be a state tax assessed.
- If you win $600 or more at a gambling facility be prepared to receive Form W-2G (Certain Gambling Winnings). A copy of this form will also be sent to the IRS, so be sure that any gambling winnings you report on your income tax return are at least equal to the sum of any Forms W-2G you receive.
- Depending on your income, if you are in a higher tax bracket, you will still have to pay any additional taxes when you claim your sports betting win as part of your income.
Taxes on gambling winnings differ from state to state
In addition, many states are currently determining if they will move to expand sports betting and how they will tax both service providers and gamblers. So far only a handful of states (New Jersey, West Virginia, Delaware, and Mississippi), have concrete sport betting tax legislation, but if you plan to gamble in different states you need to keep track of any additional state taxes you may owe on your winnings.
Gambling losses may mean a tax win
Even if you are incredibly lucky, it’s likely that you will have some gambling losses if you regularly gamble on sports or other games of chance. Under the tax reform laws that went into effect this year, you can deduct losses up to the amount of your gambling income if you choose to itemize your deductions, but you cannot carry losses over to the next year if they are in excess of your income.
Unless gambling is your profession and your losses are significant, the increase in the standard deduction for the current tax year (which nearly doubled to $12,000 for single filers) may make itemizing not worth the added hassle.
Record-keeping is essential
If you do plan to itemize your gambling losses, the IRS requires that you keep detailed records of each session of your gambling activities with specifics pertaining to:
- Where, when and with whom you gambled for each time you participated in wagering activity;
- The name, address and location of the casino, racetrack or other gambling venue; and
- How much you won and lost.
Be sure to keep your gambling receipts, wagering tickets and any canceled checks or other items to supplement your own recordkeeping.
What professional gamblers need to know
If you are a professional gambler (i.e., gambling is your full-time gig and you are generating revenue from it) then all of the above information applies to you. In addition:
- Tax reform may up your chances of winning from a tax perspective. This is due to an expansion of the scope of gambling loss deductions that can be claimed as trade or business expenses.
- Under the new tax law, allowable gambling losses include expenses related to gambling activities. This may include your travel expenses when you go to a casino and meals you buy when away from home when you are on business.
- For tax years 2018 through 2025, any expenses you deduct must be added to your gambling losses to calculate the value of your deduction. They cannot be written off as separate business expenses.
Remember, you can only deduct gambling expenses if you are also reporting your winnings as income on your tax return and itemizing your expenses instead of taking the standard deduction.
You can always bet on the IRS
Whether your gambling interests include newly legal sports betting, lotteries, raffles, animal races, casino games, or other activities, don’t overlook your tax obligations. Be sure to keep detailed records of your activity and, if necessary, consult with a tax professional to make sure that you are in compliance with state and federal tax laws related to gambling while also taking full advantage of any additional deductions allowed under tax reform.
Jonathan Medows is a New York City based CPA who specializes in taxes and business issues for freelancers and self-employed individuals across the country. He offers a free consultation to members of Freelancer’s Union and a monthly email newsletter covering tax, accounting and business issues to freelancers on his website, www.cpaforfreelancers.com, which also features a new blog, how-to articles, and a comprehensive freelance tax guide.
Jonathan is happy to provide an initial consultation to freelancers. To qualify for a free consultation you must be a member of the Freelancers Union and mention this article upon contacting him. Please note that this offer is not available Jan. 1 through April 18 and covers a general conversation about tax responsibilities of a freelancer and potential deductions. These meetings do not include review of self-prepared documents, review of self-prepared tax returns, or the review of the work of other preparers. The free meeting does not include the preparation or review of quantitative calculations of any sort. He is happy to provide such services but would need to charge an hourly rate for his time.
Gamblers understand the concept of win some, lose some. But the IRS? It prefers exact numbers. Specifically, your tax return should reflect your total year’s gambling winnings – from the big blackjack score to the smaller fantasy football payout. That’s because you’re required to report each stroke of luck as taxable income — big or small, buddy or casino.
Gambling Losses New Tax Plan
If you itemize your deductions, you can offset your winnings by writing off your gambling losses.
It may sound complicated, but TaxAct will walk you through the entire process, start to finish. That way, you leave nothing on the table.
How much can I deduct in gambling losses?
You can report as much as you lost in 2019 , but you cannot deduct more than you won. And you can only do this if you’re itemizing your deductions. If you’re taking the standard deduction, you aren’t eligible to deduct your gambling losses on your tax return, but you are still required to report all of your winnings.
Where do I file this on my tax forms?
Let’s say you took two trips to Vegas this year. In Trip A, you won $6,000 in poker. In the Trip B, you lost $8,000. You must list each individually, with the winnings noted on your return as taxable income and the loss as an itemized deduction in Schedule A. In this instance, you won’t owe tax on your winnings because your total loss is greater than your total win by $2,000. However, you do not get to deduct that net $2,000 loss, only the first $6,000.
Gambling Tax Deductions United States
Now, let’s flip those numbers. Say in Trip A, you won $8,000 in poker. In Trip B, you lost $6,000. You’ll report the $8,000 win on your return, the $6,000 loss deduction on Schedule A, and still owe taxes on the remaining $2,000 of your winnings.
What’s a W-2G? And should I have one?
A W-2G is an official withholding document; it’s typically issued by a casino or other professional gaming organization. You may receive a W-2G onsite when your payout is issued. Or, you may receive one in the mail after the fact. Gaming centers must issue W-2Gs by January 31. When they send yours, they also shoot a copy to the IRS, so don’t roll the dice: report those winnings as taxable income.
Don’t expect to get a W-2G for the $6 you won playing the Judge Judy slot machine. Withholding documents are triggered by amount of win and type of game played.
Expect to receive a W-2G tax form if you won:
- $1,200 or more on slots or bingo
- $1,500 or more on keno
- $5,000 or more in poker
- $600 or more on other games, but only if the payout is at least 300 times your wager
Tip: Withholding only applies to your net winnings, which is your payout minus your initial wager.
What kinds of records should I keep?
Gambling Loss Deduction Tax Reform
Keep a journal with lists, including: each place you’ve gambled; the day and time; who was with you; and how much you bet, won, and lost. You should also keep receipts, payout slips, wagering tickets, bank withdrawal records, and statements of actual winnings. You may also write off travel expenses associated with loss, so hang on to airfare receipts.
Use TaxAct to file your gambling wins and losses. We’ll help you find every advantage you’re owed – guaranteed.