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Don't Forget Gambling When Doing Your Taxes

March 10, 2014 at 2:00 PM | by | ()

We’re gamblers when it comes to just about everything in Vegas, but there’s one thing we don’t mess with and that’s taxes. Every state and country (Good luck, Canada) has its own tax laws when it comes to travel and gambling and it can all get a little confusing. We always recommend speaking with a certified tax professional before doing your taxes, but here are some tips to get you started.

Gambling winnings are all taxable and so are large comps (i.e., flights and vacations for high rollers, not your cup of coffee). You must report all gambling income on Line 21 ("Other Income") of IRS Form 1040. So, if you're a winner, prepare to pay up. If you're not, you're able to write off some of your gambling losses. Every casino will provide tax records called a win/loss statement of your gambling from the previous year around February and March. While you'll have to pay taxes for your winnings, you can deduct the losses. Keeping your own record of each gambling session is best, but win/loss statements are helpful for many gamblers.

The IRS makes paying taxes fairly simple when you win a jackpot on a slot machine, video poker or at bingo. When you hit a jackpot of $1,200 or more, a casino employee will come pay you by hand and give you a W-2G form proving your winnings for tax purposes. If you gradually reach $1,200, you won't be given an individual form since W-2G forms are held just for jackpots. The “magic number” for Keno is a $1,500 jackpot. The IRS also requires all poker tournament sponsors to report when a competitor has winnings of more than $5,000.

Taxes on table games (like blackjack) and sports betting aren’t as simple as the other games in a casino. The IRS allows you to report these winnings on the honor system. Casinos don’t keep specific records on all table games and sports betting so it’s up to you to keep accurate record of your wins and losses, even if you use a players club card. The same win and loss write-offs can apply here, but you must submit logs.

Again, consult a tax advisor to discuss how gambling wins and losses affect you; especially, if they're substantial, one way or the other. There's no blanket statement for gambling and taxes because everybody's situation is different. The information we shared here is just that. You're responsible for making your own assessment of your specific circumstances and seeking the appropriate counsel. Yeah, taxes are a serious deal.

[PHOTO: Calvin Ayre]

Archived Comments:

You forgot two things

Okay, admittedly they're rare, but still...

First, the sports book IS supposed to cut a W-2G if you make a bet that pays off at 300-1 or higher (and you won at least $600 on it).  This usually requires hitting something like a superfecta.

Second, if you either place a bet (or simultaneous combination of bets) of $10,000 or more, or receive a payout of $10,000 or more, it is reported - not so much for gambling purposes as it is for money laundering purposes.

Also, you can report losses only (a) if you itemize deductions, (b) if you can prove you lost that much gambling, and (c) only up to the amount you won.

Interesting tidbit of information

Many years ago, in Atlantic City,  I played in a free game of bingo at Ballys. I won the coverall for $1,000. I thought cool,  free money.  Well not so fast, because I had to give them my Total Rewards number when I won, several month later in the male I got a 1099 for the win.  I didn't understand why, since it wasn't over $1200.  Well what I found  out was that if you win I think over $600 on a game that was "free" you have to pay taxes on it.  The $1200 rule is if you make a wager.  Little known fact that I didn't know. The $600 amount on a "free" game, may not be right, but it's definitely worth checking.  It could also be something in NJ.  I'm wondering if that's why in Vegas at places like the Boyd properties, the way they get around the tax implications is by giving "slot dollars."  Although I would be interested to know about all those promotional drawings they have, when people when money, what the threshold is before the tax man cometh.

Now from your tax advsior.

  1.  If you get audited, that win/loss statement is pretty much worthless since the IRS knows they aren't very accurate.  Keep a log.  I text myself how much I pull out of my wallet, how much I put back in my wallet, what game I played and where I played it.  Then I put it in a spreadsheet when I get home.

  2.  If you gamble in a non-Indian casino in New York and hit more than $600 on the slots, you will get a W2G.  That is because you technically won the lottery and the lottery has a lower threshold than regular slots.

  3.  Not only do you have to watch out for state tax laws, in Ohio you also have to watch out for city tax laws.

@ermago, winning slot dollars isn't a taxable event.  What you win with those dollars is the taxable event.  And for promo drawings, it is $600 which is the same as if you won a radio station contest.

Canada No Tax

In Canada you do not have to pay taxes from casino, lottery, or any contest winnings.  If a Canadian wins any of the above in the U.S.A. a portion is taken as if we were American citizens.  When we get home we have to file to the IRS to get the money refunded.  There are U.S. and Canadian, companies that specialize doing this for Canadians.  People are probably saying lucky Canadians, but we have a lot taxes that the U.S. doesn't have.  We also don't have the tax write offs for income tax that Americans have.