Gambling can be fun when done responsibly, and part of gambling responsibly means keeping records of wins and losses for tax purposes.
Even though gambling can be fun, you must always remember to report to the IRS on your tax return if you win a large prize. You should report all gambling winnings as taxable income.
The term gambling is rather broad and includes activities you might not consider, including placing bets at a casino’s sportsbook, raffles, horse races, bingo, and other cash winnings.
It may also surprise you to know you should keep a record of your losses as well.
How & Why to Keep Records
If you do not keep records, you may “be required to pay estimated tax,” which could amount to a more significant sum than what you gambled.
A good practice to keep when gambling is to write down what you started with and how much you won or lost that day.
When it comes to losses, non-professionals can report losses as tax-deductible if you itemize your deductions. There is a limit “only to the extent of the winnings, also requires you to report all money you won as taxable income on your tax return. “
Only professional players report all losses on Schedule C.
Consequences for Ignoring the Law
Again, gambling is fun when you do it the responsible way, but many don’t because they do not know the law or the consequences. Most people don’t understand that they must place their winnings and losses on their tax returns. If misreported, you may find yourself with penalties and late fees.
Tips for Gambling Responsibly
When we suggest gambling responsibly, your first step should be to set a budget for yourself. This budget should ensure you won’t be adversely affected should you lose the money. Don’t get stuck in the trap of thinking you are so close to winning the jackpot, and instead grow more in debt. An easy way to do this is to bring only the cash you are willing to lose, instead of bringing a bank card. Many think gambling is an easy way to make money, but its rare people walk out with a large win.
At FilipekandCompany we would be happy to answer your questions about taxes and gambling. Email us at firstname.lastname@example.org and come to our website to see what else we can do for you.