In part 1, I suggested to not have the taxes taken out immediately after hitting a jackpot over $1200. Instead keep a log and get win/loss statements from the casinos you play at the most.
Let’s see what the IRS thinks:
Your gambling winnings are fully taxable and must be reported on your income tax return, says Mike Dobzinski, a spokesman for the Internal Revenue Services. He has five tips for gamblers:
1) Gambling income includes winnings from lotteries, raffles, horse races, and casinos – whether it is cash or the fair market value of prizes such as cars and trips.
2) Gambling operators are required to give you Form W-2G, Certain Gambling Winnings, if you win $1,200 or more in gambling winnings from bingo or slot machines and more than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament.
3) Report all gambling winnings on the “Other income” line of Form 1040.
4) Claim your gambling losses up to the amount of your winnings on Schedule A, Itemized Deductions, under “Other Miscellaneous Deductions.” You must report the full amount of your winnings as income and claim your allowable losses separately. You cannot reduce your gambling winnings by your gambling losses and report the difference. Your records should also show your winnings separately from your losses.
5) Keep accurate records. “If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings.”
Two things keep coming up in my research. Keep good records, logs and receipts – and that win/loss statements aren’t good enough by themselves. Remember – all wins AND losses are taxable!
Don’t make any royal tax mistakes. That’s all for now!