If you have won money gambling, the Internal Revenue Service expects you to report it and deduct losses, if applicable. Reporting all winnings and losses can help maximize your tax situation – as required by law! No matter whether it comes from private games of poker with friends or jackpot wins in Las Vegas slot machines; all winners need to inform them.
The IRS considers all forms of income, such as gambling winnings, to be taxable if they exceed a set dollar amount. Gambling wins include lottery prizes, casino winnings, sportsbooks and online gambling sites – though some states do not apply state income taxes directly on these winnings, federal taxes still apply and usually result in an 18% federal tax hit on anything over $600 won from gambling sites or lotteries.
If you win any kind of wager, the payer typically sends both you and the IRS a W-2G or 1099-MISC tax form as proof of winnings and any amounts withheld for federal income tax if that was part of their agreement to provide tax information to them. These documents also list any amounts withheld as part of any percentage withholding agreement you made when giving them your personal details.
Most taxpayers do not itemize deductions, especially those related to gambling losses, since the standard deduction provides significant tax relief (totalling $12,950 in 2022 for single filers). As such, one way of avoiding tax on your winnings would be using them against gambling losses up to their extent; otherwise taxes could still apply based on winnings received.
Winnings from any form of gambling must be reported on your tax return using Schedule C, which covers all forms of income. Depending on state laws, additional gambling-specific forms may also need to be submitted.
The Internal Revenue Service suggests keeping a diary or record of your betting and gambling activities for a year, including dates and types of specific bets or gambling activities as well as names of any people with you at a casino or racetrack as well as amounts won and lost. Keep this information handy to enable you to verify the amounts reported on your tax return and avoid incurring penalties for inaccurate or incomplete reporting. Depending on the circumstances surrounding your winnings, additional documents or evidence such as tickets or receipts may need to be presented if the IRS audits your return. For anyone needing assistance filing their gambling winnings taxes correctly we’re here to help – our expert staff are ready and waiting to walk you through each step and ensure your tax return is complete and correct.