If you participate in gambling, you are responsible for paying taxes on your winnings. However, the good news is you may not have to pay taxes on all of your gambling winnings. Today, this article is discussing some of the taxes you may need to pay.
How Much Did You Win?
The amount of money that you won plays a role in how much you will have to pay in taxes. Below, are some incomes that must be reported to the IRS:
- $600 or higher won at the horse track
- $1200 or higher won at a slow machine or bingo game
- $1500 or higher won from keno
- $5000 or higher won at a poker tournament
NOTE: To receive winnings of the amounts listed above you will have to give out your social security number and fill out a Form W2-G. Usually, if you win at a casino they take 25% of your winnings, send it to the IRS, and give you the remaining amount. One thing about winning big is you are going to pay the IRS something because casinos can take up to 28% of your winnings to give to the IRS.
Reporting Taxes for Smaller Winnings
Even if your winnings are smaller than the ones we listed above, it is your legal obligation to let the IRS know about your winnings. You will fill out line 21 on Form 1040 and report the winnings as other income. Even if you win $50 and the casino didn’t report it, the IRS expects you to inform them about this money so it can be added to your total income.
You don’t have to pay taxes on all of the money that you win. You have the option of offsetting the amount of taxes owed by reporting your losses as well. This information is listed on line 28 on the Schedule A form. However, you can only claim as much as the total amount won that you report on your 1040, which could cancel out your taxable gambling income. Keep in mind that when you are deducting this way you want your itemized deductions to be more than the standard deduction. If it is lower than the standard deduction, it does not make sense for you to go through the trouble of itemizing.
In addition to paying your federal taxes, your state may want you to pay them some taxes as well. The downside of this is each state is different when it comes to their gambling income rules. Therefore, to determine the amount that you have to pay in state taxes you have to refer to your state tax guidelines.
Please notice that if you win the money while playing free spins or any other casino bonuses you might need to play through the wagering requirement in order to receive the money.
When you win from gambling you may have to pay taxes on it. However, keep track of all of your gambling activities because you may find that your winnings are offset once you add in all of the money that you had to put in to win the amount.
The information in this article is a general guide and should never be taken as legal advice. Please consult a tax attorney with any specific questions you may have.
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