Press Releases
JK Harris warns gambling winnings are income in eyes of IRS
NORTH CHARLESTON, S.C. – So, you took a summer vacation to Las Vegas and won big at the casinos. Don’t think for a minute that the IRS won’t take a portion of those winnings in the form of taxes.
Gambling winnings are fully taxable and must be reported on your tax return.
“The biggest thing when you win is they (the casino, racetrack, etc.) will issue you a W-2G,” said Ralph Havens, Director of Professional Services for JK Harris and Company, the nation’s largest tax resolution firm. “The IRS will look for that on your tax return under ‘Other Income.’”
Generally, the IRS says gambling winnings from horse racing, dog racing, jai alai, lotteries, keno, bingo, slot machines and other similar activities need to be reported on your tax return. The general dollar amounts that need to be reported are as follows:
- $600 or more from gambling winnings and the payout is at least 300 times the amount of the wager.
- $1,200 or more in gambling winnings from bingo or slot machines.
- $1,500 or more in proceeds (the amount of winnings less the amount of the wager) from keno.
- Winnings of more than $5,000 from any sweepstakes, wagering pools or lotteries.
The good news is that losses can also be written off on your tax return, to an extent. To do this, you will need to itemize and attach a Schedule A to your tax return for miscellaneous deductions. There are, however, limitations as to how much you can write off in gambling losses.
Losses can only be deducted if you have winnings from gambling. And, the losses you deduct can’t be more than the gambling income you report on your return. Also, you won’t be able to reduce your gambling winnings by subtracting your gambling losses and reporting the difference.
Havens said the biggest mistake people make is reporting more losses than winnings. For instance, a person wins $5,000 but tries to write off $10,000 in losses as miscellaneous deductions. That, Havens said, will raise a red flag for the IRS, and an audit is likely not far behind.
A good rule of thumb is to have proof of your losses. If you don’t have proof and you claim an unrealistic amount on your return, you may get audited.
But how do you prove how much money you’ve lost gambling?
“If you’re at a casino, and you win money, go to the casino office and ask for a print out as to how much money you may have gambled,” Havens said. “They can normally tell from the amount of your winnings and what game you were playing approximately how much money you wagered.”
Even if you are at a racetrack, Havens said you could keep track of how much you have lost simply by saving your tickets from the races you bet on.
Also, Havens warns that unless you are a professional gambler and can prove that you gamble at least 180 days of the year, you cannot claim travel expenses for gambling trips. If you are a professional gambler, you need to file a Schedule C with your tax return.
Havens said most of the clients who come to JK Harris with issues concerning gambling winnings and losses contract with the company for audit representation.
“A lot of times the IRS comes back and assesses them (taxpayers) two years later for winnings they did not claim on their return,” Havens said. “If they don’t have the money to pay, they submit an Offer or arrange an Installment Agreement.”