Gamblers know that your finances can change with one lucky bet. Whether you pump money into a slot machine or wager that your favorite team will win, success could mean a windfall. However, be prepared for Uncle Sam to take a cut.
The IRS has very specific rules about taxing gamblers, and if you’ve hit the jackpot or made significant wins during 2023, you may owe money.
Kondler & Associates, CPAs, is here to guide you through the ins and outs of your tax obligations on last year’s gambling winnings.
Federal Taxes on Gambling Winnings
According to the federal tax code, all money earned gambling is considered taxable income and must be reported on your annual tax return. This includes any cash prizes, as well as any non-cash prizes like vacations or cars.
The IRS wants to know if you win more than $600. Sometimes, the establishment that pays your winnings will also issue you a Form W-2G.
You’ll receive a W-2G if you win:
- $5,000 or more at a poker tournament
- $1,200 or more on bingo or slots
- $1,500 or more in keno profits
- $600 or more if the payout is over 300 times the amount of your wager (not including poker, bingo, slots, and keno).
But even if you don’t receive a W-2G form, any gambling income is still taxable and must be reported on your tax return.
How Do States Treat Gambling Taxes?
Here’s where it becomes more complicated. In addition to federal taxes, states have their own tax laws on gambling winnings. States like California and Florida do not tax state lottery winnings, while others like New York and Pennsylvania may have a separate state-specific form for reporting gambling income.
You may also be subject to state income taxes depending on where you placed your bets. Our team handles gambling tax returns across all states, ensuring that your winnings are always accurately reported. We understand the nuances of state tax laws and how they apply to gambling income.
Can You Deduct Gambling Losses?
The IRS allows you to deduct your gambling losses but with some caveats:
- You can only claim gambling losses if you itemize your deductions on Schedule A (Form 1040).
- Non-professional gamblers can deduct losses up to the amount of their reported winnings.
For example, if you won $10,000 in 2023 but lost $15,000 in the same year, you can only deduct up to $10,000 of your losses. You’ll also need to provide proof of your losses through receipts or a gambling diary.
Documenting Your Losses
- Maintain a gambling log or diary to record each wager, win, and loss.
- Retain losing lottery tickets, sportsbook tickets, bank withdrawal notices, and statements of actual winnings or payment slips provided by the gaming establishment.
Reporting Requirements
The IRS requires individuals to report gambling winnings of a certain threshold. Failing to report these earnings can lead to penalties and audits.
When and How to Report
Timing is key when it comes to reporting your gambling income:
- You must report gambling winnings for the tax year in which it was earned.
- Reporting happens through Form 1040, along with any necessary additional schedules for specific gambling activities.
What If You're a Professional Gambler?
If gambling is your job, taxes look a bit different. Professional gamblers pay taxes on their net income, which means they can deduct expenses related to gambling (travel, meals, poker coaching, etc.).
You must file as self-employed income on Schedule C (Form 1040).
Get Expert Help with Your Gambling Taxes
If you have questions about your 2023 gambling wins and tax obligations, contact Kondler & Associates, CPAs, today. We’re here to help you turn your financial success into a well-managed tax strategy.
