Gambling Winnings

As Gambling Winnings and Losses are becoming more common it is obviously becoming a more common tax issue that has to be addressed. This article is going to discuss recreational gambling. Professional gambling has a different set of issues which also includes self employment tax. So for this article we are going to stick with the more common recreational gambler. For purposes of this article we will also not discuss AMT.

First of all all gambling winnings are taxable income. Just because you don’t receive a W-2G does not mean it is not taxable. People are often under the misconception that if it is a small amount they are not responsible to pay taxes but that is not true. This income is reported on your 1040 as Miscellaneous/Other income not subject to self employment tax.

Another misconception is that gambling losses directly offset gambling winnings. This is not necessarily true. Gambling losses are deducted on your Schedule A as a miscellaneous deduction not subject to the 2% rule. If you already itemize then your losses will probably directly offset your winnings. If not then you may not be able to offset any of your winnings.

If a person is a regular gambler, i.e. not once a year, then a person is required to keep a log or diary of there winnings and losses by day and type of wager. It is unclear whether a person is required to separate winning and losses by hand or for the entire time a person is setting at that table. The most common practice appears to be later.

The information contained on this site should in no way be considered to be professional advice in the form of either tax, accounting, or legal service or consultation. You should always consult with a professional familiar with your individual circumstances before making any specific decisions related to accounting, tax, or legal matters.