Tax Issues with Gambling Winnings and Losses

Like to play the ponies? Hooked on Texasthe IRS will have trouble figuring out if you won
Hold’em? Enjoy spending a day in a Casino out ofsomething. The agency will not. The casino, track or
the elements? Gamblers may love a bit of gambling,whoever is paying you must issue a W-2G if you
but there is a tax side to your gaming that you need tohave certain winnings and will actually withhold taxes
keep an eye on or suffer the wrath of the IRS.from larger gains. In fact, the IRS often has a
The first thing to understand is gambling winnings arerepresentative in the larger gaming institutions to
taxable. Lucky you. This means winning from every“congratulate” you on the success.
kind of game including the basics like lotteries to moreSo, how do you report these winnings? As always,
sophisticated gaming like horse racing, craps, pokerwe return to the 1040 form. The magic area is found
tournaments and sports betting. This is also true foron line 21. You simply report it there. Ah, but what
winnings that include things other than cash such asabout losses? Well, you can take them as well if you
vehicles or trips.itemize deductions, but you can only deduct up to the
If you have a non-cash winning, the tax is based onamount you actually won. Put in practical terms, this
the fair market value of the item. If the vehiclemeans that you can only eliminate the gain, not actually
would’ve cost $35,000 at a dealer, that is the figurecreate a loss for the rest of your gains.
that will be used. Yes, most people end up selling theirTax issues are rarely simple. The IRS would like you to
vehicle winnings to pay the tax. Hey, you still end upjust pay and pay, but you can get the detailed scoop
with cash!on paying taxes on you winnings in IRS Publication 525
Most gamblers get into trouble based on the belief thatoff the IRS site.