Is my gambling income taxable?

According to the Internal Revenue Service (IRS), your gambling income is always taxable. Whether your realize it or not, your gambling income includes more than just money won playing poker and slot machines. In fact, your gambling income includes any money won at horse races, dog races, playing table games, raffles, tournament, private party games, scratch-off tickets, the lottery, bingo or casino gambling. Additionally, your gambling income includes any non-cash prizes, such as cars or vacations. Non-cash prizes are taxed at fair market value.

Can I deduct my gambling losses?

You may deduct your gambling expenses and losses from your tax return—but only under certain circumstances. First, you must itemize your losses and expenses before you deduct them from your return. Never subtract your losses from your winnings and report the difference. For instance, if you won $500 in a raffle but lost $200 casino gambling, you would report each instance. You would never report your winnings as $300. Additionally, you are not allowed to deduct your losses and expenses unless they equal less than your winnings. If your expenses outweigh your gambling income, you may not deduct them on your tax return.

Proving Income & Losses

You must be able to substantiate any claim or deduction made on your tax return. If you deduct an amount from your tax return as a gambling loss, you must be able to prove that you actually lost money gambling. How? The IRS suggests keeping a written record of your losses and expenses. Additionally, make sure you save any receipt, ticket, or wagering slips that indicate how much you won / lost. If you cannot prove that you won or lost a certain amount, the IRS may suspect that you are attempting to evade tax payment.

When keeping a written record of your winnings and losses, be sure to record the name of the gambling establishment and the address. Write down the names of the individuals who participated in the activity with you and the amount that you won or lost. When recording winnings and losses from slot machines, write down the name of the machine, the date you played, and the time you played. Keep a running record of any bingo games you participate in, the amount you spent on tickets, and the amounts that you won.

To record your winnings and losses from horse races, write down the races, amount that you wagered, and amount that you won. Record all lottery ticket purchases, the dates that you purchased, and the amounts that you won. To substantiate your winnings / losses, keep supplemental records such as unredeemed tickets, payment slips, and winnings statements.

Under investigation? We can help!

If the IRS suspects that you are attempting to evade tax payment by making fraudulent deductions on your tax return, you may be subject to a criminal investigation. If convicted, you may serve years in prison and have to pay a $250,000 fine. If your case is taken to court, the IRS will pursue a conviction with aggression; that’s why you need a high-quality defense attorney. Our firm is well-versed in tax crimes. If you’re been accused, Okabe & Haushalter is the place to turn. Call our office to see what our firm can do for you!

Can I deduct gambling expenses on my tax return?

According to the IRS, you can deduct gambling losses from your tax return, but only if you itemize each loss and your expenses are equal to less than your winnings. When you file your return, do not deduct the number of your losses from the number of your winnings and report the difference; each item must be calculated separately. For example, if you won $5,000 in a raffle but lost $1,500 playing table games at a casino, you are not allowed to report a $3,500 gambling income. Instead, report your income as $5,000 and your losses as $1,500.

Keeping the Record Straight

In order to make sure that your tax return is filed accurately and your gambling income correctly recorded, the IRS suggests that you keep a running journal of your wins and losses. Additionally, make sure that you keep any ticket stubs, receipts, and other documentation of your income; you must be able to substantiate your losses if you want to deduct them. In your record, the IRS suggests that you write down the name or the gambling establishment, the date, the amount that you won/lost, and any other information relevant to your income or tax return.