Do you feel lucky? Have you ever purchased a lottery ticket, scratch off, or gambled in a casino? Many Americans have. According to the National Council on Gambling, approximately 85% of all US adults have gambled at least once in their lives. Taxpayers need to know the tax implications that comes when you hit the jackpot.
1) Can I deduct gambling losses on my tax return?
It depends. You can deduct gambling losses up to the amount in winnings on your tax return. However, if you were not lucky enough to WIN, those losses you generate will not help you on your taxes.
If you do have losses, the IRS expects you to maintain accurate records such as a diary, receipts, and/or statements.
2) Will I receive a tax form if I win?
A W2-G is a form that casinos and other gambling facilities will issue upon winning, and reportable W2-G amounts can vary depending on the gambling action taken. For instance, those who win $1,200 or more at a slot machine will generally be issued a W2-G.
3) How much federal tax will be withheld from my gambling winnings?
It depends on the type of transaction and money won. According to the IRS, a withholding of 24% may be required for federal income tax purposes.
4) Will my gambling winnings affect my state taxes?
If you gamble in states with a state tax rate, you may have 1) a filing requirement for that state and/or 2) have additional taxes to pay in that state. Each state has their own threshold for filing requirements and taxes due for non-residents.
If you find yourself striking gold, Abacus CPAs is here to provide you better guidance. Contact our offices today for more information at 417.380.5000 or firstname.lastname@example.org.