Bet on it, gambling winnings are taxable

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Bet on it, gambling winnings are taxable

Saturday, February 06, 2010

Have you placed a friendly wager on Super Bowl XLIV? You are so not alone.

The NFL's championship game marks the biggest betting day of the year. While lots of folks will lose money, some will win nice chunks of change.

And it's a safe bet that many of those winners will stiff the IRS.

Yes, gambling winnings are taxable income. The IRS specifically says so.

And it doesn't say that winnings from illegal bets are exempt. Uncle Sam isn't a cop. He doesn't worry about how you get your money. He is only concerned about getting his cut. Remember Al Capone.

Some folks will intentionally ignore gambling tax rules. But for many others, there is legitimate confusion when it comes to taxes and gambling winnings.

So let me try to clear some of that up before you collect after the Saints-Colts contest Sunday night.

Winnings count as income
Let me repeat: All gambling winnings are fully taxable.

This includes, but, says the IRS, is not limited to, amounts you collect from lotteries, raffles, horse races, poker tournaments and casinos.

Note that phrase "not limited to." That means your office pool payout counts, too.

So do trips, appliance and cars you might win (or get from Oprah). You report the fair market value of the prize.

All amounts count
There's a misconception that only winnings above a certain amount are taxable. That's not true.

This incorrect assumption probably comes from the fact that official tax documents aren't issued in every situation.

When required by the IRS, casinos and race tracks get tax ID info from lucky bettors and issue each a Form W-2G. That's the case for winnings of:

$1,200 or more in gambling winnings from bingo or slot machines;
$1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
more than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament; or
$600 or more in other gambling winnings where the payout is at least 300 times the amount of the wager.

In some cases, the betting establishment must even take some federal income tax withholding from your payout. That's generally a 25 percent rate, but it could at the backup withholding rate of 28 percent if you refuse to provide the payer with your federal identification number.

And even if a W-2G is not issued, all gambling winnings must be reported as taxable income.

Reporting and writing off gambling amounts
Tell the IRS about your lucky income on line 21 of Form 1040, line 21.

If you itemize, you get a chance to reduce your gambling earnings. On line line 28, Other Miscellaneous Deductions, of Schedule A, report any gambling losses. You can claim up to the total amount you won (and reported on your 1040), effectively wiping out any taxable gambling income.

Don't worry if you win big on the Super Bowl but all your losses come from bad dog track bets. Any losing wagers can be used to offset any winning bets.

Remember, though, that you can't use your bad bets to produce a loss. They count only up to the amount of your winnings.

Keep good wagering records
In order to take full advantage of your losses, the IRS requires the same thing as it does with any deduction: good records.

You don't need to include your substantiating documents when you file, but you will need them if an IRS examiner later has any questions.

The agency suggests you keep an accurate diary or similar record. You also could be asked to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.

If you follow these rules, you should be OK with the IRS when it comes to your winnings. Good luck!

Lots of reporting winners: While it's a sure bet that the IRS doesn't get all the taxes it could on wagering winnings, it still collects a fair amount each year.

On 2007 federal returns, the latest year for which data are complete, the IRS says more than 1.6 million taxpayers reported almost $27 billion in gambling income. This includes winnings from casinos and horse tracks, lottery and raffle jackpots, as well as the fair market value of cars, houses and other noncash prizes.

That same tax year, 987,000 of those conscientious taxpayers who reported gambling income also claimed as deductions almost $19 billion in bad bets.

The wide world of wagering: The Internet has opened up a whole new and wider world of gambling.

U.S. laws, however, at both the federal and state levels, attempt to restrict our cyber betting. And most credit card companies have taken steps to to make placing online bets more difficult.

There is some support for allowing -- and taxing -- online gambling operations, but that's still a tough sell in Washington.

Americans who prefer real-life sports betting (aside from horse and dog racing), there are a few options.

Under a 1992 federal law, four states that had sports gambling at that time are allowed to keep their form of betting. They are Nevada, Oregon, Delaware and Montana.

Oregon dropped its sports gambling in 2007 and sports betting is minimal in Montana.

Last year, Delaware reinstated betting on sports, but, pending legal challenges working their way through court, the First State is stuck with taking bets only on multiple games at once.

So we're left with trips to Nevada if we want to place a bet on the Super Bowl or any sport. But once we get there, we can put our money down on myriad game-related events.

Known as prop bets, short for proposition bets, these are hundreds of unique ways to gamble. Essentially, if it happens (or could happen) in a game, a Nevada sports book will take a bet on it. And the possibilities aren't limited to the playing field.

Kim-Kardashian-Reggie-Bush_Leather-and-Laces-Celebration

Some of this year's goofier prop bets include:

How many current NFL players will be arrested during Super Bowl week?
How many times will CBS show Kim Kardashian ( at right), girlfriend of Saints' running back Reggie Bush, on TV during the game?
How many times will CBS show Bourbon Street on TV during the game?
What color will the Gatorade be that is dumped on the winning team's head coach?

Me, I'm betting on plain old yellow Gatorade; that's the odds on favorite. But if you want to make a bit more money, take red. That long-shot color choice is running at 12-to-1.

More on gambling and taxes from the ol' blog and elsewhere:

Federal court halts Delaware betting plan
Delaware preparing to take sports bets
Internet betting gets another advocate
Get your Super Bowl bets down
Nevada bookmakers are Super Bowl losers, too
Bet on it: IRS is big Super Bowl loser
Super Bowl, super taxes
Super Bowl winnings are taxable income(Bankrate.com)
Online gambling poses tax conundrum(MarketWatch)
Bookies hope Super Bowl betting super for 2010(Huliq)
Super Bowl gambling can't be a goldmine for states (Christian Science Monitor)

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Posted on Saturday, February 06, 2010 at 03:27 PM in Gambling, Sports | Permalink | Comments (28)

Tags: gambling, Super Bowl

Comments

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Nice Article, as an internet on line internet gambling house online I often am compensated into a on line internet gambling house consideration and then bet it a bit before I cash out, so I was seeking to know how that performs out on my taxes! This is beneficial thank you.

Posted by: Sports Betting | Wednesday, April 25, 2012 at 02:03 AM

Great Article, as an online casino affiliate I often am paid into a casino account and then gamble it a bit before I cash out, so I was wanting to know how that works out on my taxes! This is helpful thank you.

Posted by: Ryan | Friday, November 11, 2011 at 06:29 PM

Great information! Good Record Keeping is definitely key. We have a similar post on our blog. http://blog.avoidbeingaudited.com/2011/03/16/gambling-winnings-how-to-record-them-correctly/

Posted by: Matthew | Friday, October 14, 2011 at 03:34 PM

man the lottery system sucks

Posted by: How To Win The Lottery | Thursday, September 29, 2011 at 07:17 PM

Gambling is a taxable income in my country. They paid after-tax prize only.

Posted by: how to win the lottery | Wednesday, September 28, 2011 at 04:24 PM

I didnt know gambling was a taxable income government always want a piece

Posted by: How To Win The Lottery | Sunday, August 21, 2011 at 08:38 PM

I've had to claim my winnings on lottery many times and as much as it hurts, I'd rather pay then lose all the time. Then again, I'm not opposed to paying taxes. I mean what's the alternative?

Posted by: guaranteed lottery win | Saturday, August 06, 2011 at 11:53 PM

Love the comment from the guy that has been placing bets for years and didn't know about this. Oops. Let's hope the IRS aren't reading this blog LOL. Luckily, I'm in the UK where there is no such tax. Yay.

Posted by: Casino slots online | Monday, July 11, 2011 at 09:20 AM

I had a buddy that won I lot of money betting on sports and the IRS came down on him hard. Report ALL money

Posted by: How Do I Win The Lottery | Thursday, June 16, 2011 at 10:41 AM

That is very interesting I did not know that cash from betting had to be reported. But I guess it makes sense I just wasn't smart enough to think of it. Thank you for the information and keep up the good work.

Posted by: Ryan | Tuesday, June 14, 2011 at 07:53 PM

I like this! Lots of reporting winners: While it's a sure bet that the IRS doesn't get all the taxes it could on wagering winnings, it still collects a fair amount each year.

Posted by: finepix x100 | Friday, June 03, 2011 at 07:46 AM

Wow that really sucks... Here in the UK all gambling is tax free. Saying that though, we do get hit hard in every other taxable area!

Posted by: How to win the lottery | Wednesday, March 30, 2011 at 10:48 AM

To the average person, nothing is taxable unless it is reported to the IRS.

Posted by: Lottery Black Book | Monday, March 28, 2011 at 01:48 PM

My family had some big wins last year and we did not keep a list of wins & losses, but I came across an iPhone app called WinLoss that helps keep track of your info to help offset the winnings.

Posted by: Alan | Wednesday, February 23, 2011 at 03:41 PM

Thats some weird stuff, it has to be extremely easy to make, and lose money on bets like that.

Posted by: Site Launch System bonus | Tuesday, February 22, 2011 at 01:22 PM

The comments to this entry are closed.

Today's Tax Tip

4 September tax moves — Sept. 1 marked the arrival of Meteorological Fall, but it's still pretty darn hot across much of the United States. As we await the crisp chill of autumn, here are four cool tax moves to make this month. (Sept. 3, 2024)
The 2024 Tax Tips offer ways to file your annual return, along with post-filing advice, important tax news and, of course, ways to cut your current tax year bill. You'll find the monthly assemblages on their own respective pages: January, February, March, April, May, June, July, August, September, October, November and December. Remember, tax tasks and tips don't stop after you file your annual return!

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Tax Season 2024 continues!

We made it. Tax Day 2024 is finally over. For most of us. An estimated 19 million taxpayers got an extension to file their 2023 tax year return. That's fine.
In fact, the Internal Revenue Service appreciates some of us spreading out our filings. It gives the agency time to process the surge of returns
that came in on April 15.

But enough about Uncle Sam's tax collector and its issues. The focus now is on all y'all who filed for extensions, giving you another six months to complete your return. Let's get started on meeting that new Oct. 15 deadline. It will be here before you know it.

The monthly tips and reminders a little further down this column can help you finish up your Form 1040. There also will be tax tidbits each month that make sure you meet other tax deadlines. And, of course, you'll find advice on ways to cut your still adding up 2024 tax bill.

Finally, keep an eye on the countdown clock below. It will help you track yet more days tick, tick, ticking off toward that absolutely final fall filing due date.
Note: I'm in the Central Time Zone, so adjust accordingly for where you live.

Time for Tax Tasks

🍁 Hello 🍁 September 🍁
🍂 Fall 🍂 is 🍂 here! 🍂

OK, fall’s not here yet, at least not here in Texas according to still quite-warm temperatures. But forecasters say cooler weather — like highs in the 80s; yes, everything, especially weather, is relative — is on its way, and that meteorological promise gives up hope.

via GIPHY

As we get ready for the promised bit of chill, September also is a great month to make some cool tax moves, like those listed below. So, grab a sweater (or not yet), and let's go!
Sept. 1: Today is Meteorological Fall, the three months from Sept. 1 through Nov. 30 when days get shorter and cooler, but not cold. It's also the start of the annual National Preparedness Month. This year’s theme is “Start a Conversation,” since it's important to talk with your loved ones about potential emergencies. It's also critical to be prepared, as the Atlantic and Gulf of Mexico hurricane season usually peaks in September.

We’ve already had three tropical systems do enough damage to prompt Federal Emergency Management Agency (FEMA) major disaster declarations. The 2024 tropical storm season’s second named storm, Hurricane Beryl, landed as “just” a category 1 on the Texas coast, but still took 38 souls and left Lone Star State residents facing an estimated $30 billion in damages.

Hurricane Debby made two U.S. landfalls, in the Big Bend area of Florida and then again in South Carolina before moving up the Eastern Seaboard, producing disaster declarations all the way up to Vermont. Tropical Storm Ernesto, followed, slamming the U.S. territories of Puerto Rico and the U.S. Virgin Islands, as well as spawning deadly rip tides along East Coast beaches as the storm moved toward Bermuda.

And, coinciding with Meteorological Fall, we’ve still got three months of the 2024 hurricane season to go!

That has coastal residents on edge, since Uncle Sam's official forecasters at the National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center say we could get 17 to 25 total named storms, which are those with winds of 39 mph or higher. Of those, eight to 13 are forecast to become hurricanes, meaning winds of 74 mph or higher. Four to seven becoming major hurricanes; that’s category 3, 4 or 5, with winds of 111 mph or higher.

Regardless of the count, it only takes one to wreck your world. If you haven’t already, get ready for not just tropical systems, but whatever dangerous weather that’s common where you live. The countdown clock above can help you keep track of how many more days you have to worry about tracking any size or type of tropical storms. You also might want to check out the ol' blog's special Storm Warnings collection of special pages with posts offer tax advice on preparing for, recovering from, and helping those who sustain damages from the many ways that that weather goes wild.

Sept. 2: Happy Labor Day! This annual celebration of workers' contributions is a federal holiday and day off for many.

When you get back to work after this three day holiday, take a few minutes to check the federal tax amount that’s coming out of your paychecks. If you need to adjust your withholding so that you have the most accurate amount of taxes withheld, now is the time to do that. Submitting a new W-4 early this month will mean any changes are spread over the last four months of the year, making any impact less noticeable.

Sept. 3: If you live in Auglaize, Crawford, Darke, Delaware, Hancock, Licking, Logan, Mercer, Miami, Richland, or Union counties in Ohio, today is your Tax Day. The Internal Revenue Service granted individual and businesses in those counties tax relief since they were declared major disaster areas following a tornado outbreak in March.

Sept. 10: Do you work as a server at a restaurant or at any other establishment where gratuities from customers are part of your compensation? I hope you get all the tips you deserve for doing your job well. Remember, though, that those tips are taxable income.

Whether you're dining at your favorite eatery or getting food delivered to your home, if a tip isn't included on your restaurant or delivery bill, click the image above to calculate how much to tip the person who brought it to you.

And if you got at least $20 in gratuities in August for your extraordinary services as a food server or hair stylist or parking valet or whatever job where tipping is common, you must report that amount by today. Use Form 4070 to let your employer know the total tips you took in last month.

Sept. 16: Today is the deadline to pay your third installment of estimated taxes. This tax is due on income that’s not subject to withholding, such as investment earnings or contract work. Most estimated tax filers make the payments four times a year. The September payment is for such earnings received in June, July, and August. It’s usually on the 15th, but since that was Sunday, the deadline is pushed to the next business day — today!

Sept. 23: Sept. 22: The Autumnal Equinox arrives today at 8:44 a.m. Eastern Daylight Time in the Northern Hemisphere, marking the first day of Fall for all us who don't follow the meteorological fall calendar. Adjust for your time zone, since the equinox occurs at the same moment worldwide. It's also a go-to day to think about home maintenance that will help you weather the coming colder weather. The Inflation Relief Act includes extension of older and addition of new energy-related tax breaks, including some for residential energy improvements.

Sept. 30: Wow! Where did September go? That’s a good question to ask if you got an extension to file your 2023 tax return earlier this year. The last day of this ninth month means that your absolutely final Oct. 15 due day is another month closer. So you might want to get to work on that Form 1040 now. The easiest way to do do is to use tax software and electronically file.

If your adjusted gross income is $79,000 or less, you should check into Free File, the no-cost online tax preparation and electronic filing program offered by the IRS and its Free File Alliance partners. It’s open through the Oct. 15 extension deadline. This year, eight tax software companies offer programs to qualifying taxpayers.

Note that the Free File $79,000 or less income threshold applies to all filing statuses. If your income is too high, you still can file for free by using Free File's Free Forms option.

Small Business Tax Calendar: Important filing, deposit and record keeping dates throughout the year that your company needs to know. You can get more tax calendar information at the IRS' online calendar page and view the full year's important business and individual tax dates in IRS Pub. 509.

State Tax Help

Don't forget your state taxes!
Forty-three states and D.C. collect personal income taxes. But even if you live in of the seven states without an income levy, you still face other state (and local) taxes.

State Tax Departments provides links to your state's Web page. The companion page, Tax Tidbits, is the compilation of blurbs about each state's tax laws. And for more state tax news, check out all our state tax bloggings.

Tax Forms

Thanks to our increased use of tax preparers and computer software, many of us don't see our tax forms until we sign and file them. But knowing what's on these documents, either in paper or digital form, and why the IRS wants it is key to understanding our tax system. And knowledge definitely is power, especially when it comes to tax savings. Find this valuable information in the ol' blog's special Tax Forms 2024 page.

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These five Coronavirus (COVID-19) and Taxes pages have details:
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…and so it continues into 2023
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Tell it to the Hill

While it's easy to rail at the IRS, for the most part we can thank — or blame — Congress and the White House for our tax laws. So if you have an issue with tax legislation or want a tax bill passed, you need to let your federal legislators and the White House occupant know of your concerns. You can find out who in Washington, D.C., to contact (and how), as well as get information on your local lawmakers for matters, tax or otherwise, closer to home, at USA Gov.

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