Consider Taxes when Gambling

Last updated on September 5, 2021

It sounds like an odd combination, but the fact is that gambling and taxes go together. You gamble to have fun, win money and forget about the seriousness of life, but the IRS does not leave you even at the slot machine. That is because any money you win through luck is considered earnings by the IRS and, therefore, taxable.

According to the IRS, “Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips.” So any prize money you receive is taxable.

In case of losing at gambling, you may want to keep a record of the losses by keeping documentary proof so that at the time of filing of taxes, you can claim the losses as deductions. You can claim gambling losses on Schedule A, Itemized Deductions under Other Miscellaneous Deductions.

In case of wins too, you will need proof of how much you won to calculate the amount of taxes you will need to pay. You need to show the wins and the losses separately, and not subtract the losses from the wins and claim the difference.

Winning of $1,200 or more in gambling from bingo or slot machines require the payer to issue you a Form W-2G, Certain Gambling Winnings. Any other gambling winnings that are subject to taxes will also need to be reported to the IRS.

You do not need to think about taxes while gambling, but before you stop for the day, you must remember to collect the receipts and other documents concerning your day’s wins and losses for future use.