Play your tax cards right with gambling wins and losses

If you gamble, these tips can help you save money or at least give you a better projection on your next tax bill. Win or lose your income tax bill will be affected.  Revisions under the Tax Cuts and Jobs Act (TCJA) could also have an impact. See our tips below:

1. Report your wins 

You must report 100% of your gambling winnings as taxable income. This includes the value of complimentary goodies (“comps”) provided by gambling establishments.

Winnings are subject to your regular federal income tax rate.

Keep in mind that amounts you win are tracked and may be reported to you on IRS Form W-2G (“Certain Gambling Winnings”). In some cases, federal income tax may be withheld, too.

Anytime a Form W-2G is issued, the IRS gets a copy. So if you’ve received such a form, remember that the IRS will expect to see the winnings on your tax return.

2. Write off your losses

The one upside to losing any money in gambling is being able to write off these losses as a miscellaneous itemized deduction.

Due to the doubling of the standard deduction for 2018 under the TCJA means that, even if you typically itemized deductions in the past, you may no longer benefit from itemizing.

Itemizing saves tax only when total itemized deductions exceed the applicable standard deduction.

Also be aware that the deduction for gambling losses is limited to your winnings for the year, and any excess losses cannot be carried forward to future years. Also, out-of-pocket expenses for transportation, meals, lodging and so forth can’t be deducted unless you qualify as a gambling professional.

Professional Gambler? For 2018 through 2025, the TCJA modifies the limit on gambling losses for professional gamblers so that all deductions for expenses incurred in carrying out gambling activities, not just losses, are limited to the extent of gambling winnings.

3. Track your activities

To claim a deduction for gambling losses, you must adequately document them, including:

  1. The date and type of gambling activity.
  2. The name and address or location of the gambling establishment.
  3. The names of other persons (if any) present with you at the gambling establishment. (Obviously, this is not possible when the gambling occurs at a public venue such as a casino, race track, or bingo parlor.)
  4. The amount won or lost.

You can document income and losses from gambling on table games by recording the number of the table you played and keeping statements showing casino credit issued to you. For lotteries, you can use winning statements and unredeemed tickets as documentation.

Please contact us if you have questions or want more information about the tax treatment of gambling wins and losses.

CAPATA is a full-service accounting firm located in Laguna Niguel in southern California.

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