Gambling income includes winnings from lotteries, raffles, horse races and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips. Gambling losses also can be deducted on tax returns, but only up to the extent of winnings, according to the IRS.
If your winnings are subject to federal tax withholding, the gaming establishment or payer is required to issue a Form W-2G, Certain Gambling Winnings. The payer must give you a W-2G if you receive:
- $1,200 or more in gambling winnings from bingo or slot machines;
- $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
- More than $5,000 in winnings (reduced by the wager) from a poker tournament;
- $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or, any other gambling winnings subject to federal income tax withholding.
Winnings should be reported on the “other income” line of Form 1040, on the U.S. Federal Income Tax Return. You cannot reduce your gambling winnings by your gambling losses and report the difference. Records should show your winnings separately from your losses.
If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings.
Refer to IRS Publication 529, Miscellaneous Deductions, for more details about the type of information you should write in your diary and what kinds of proof you should retain in your records.
For more information on gambling income and losses, see IRS Publication 529, Miscellaneous Deductions, or Publication 525, Taxable and Nontaxable Income, both available at IRS.gov or by calling 1-800-829-3676.
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