Most bets are made casually and in an informal mood between friends and family, mainly paid in cash. This extra income could be useful for a snack, some extra clothes or paying bills. Does that exempt them from being taxable? What if it isn’t that much money? Lets dive into it on this month’s blog.
For tax purposes, gambling may include but isn’t limited to income from lotteries, raffles, horse races, bingo, and casinos. It also includes fair market value of prizes, such as trips or vehicles won on a contest, slot, or bet.
The amount of taxes to be paid may differ due to many reasons, like the type of prize,market value of the prize, game won, and other considerations. Bets, gambling
If you win gambling
You should receive from the payer a Form W-2G, if you don’t receive it, you may have to pay an estimated tax on that extra income.
Also, you may have to report the gambling winnings on Form 1040 or Form 1040-SR.
If you lose gambling
Gambling losses can be deducted if they are submitted among the other itemized deductions on Schedule A (Form 1040). Also you are required to keep a record of the winnings and losses.
It is important to highlight that the amount of deductible gambling losses can´t be higher than the amount of gambling income.
Keep a record
Keep track of the income and withdraw of money referring to gambling. As a paytaxer you should be able to provide receipts, tickets or statements that show the amount of both of the winning and losses.
The Revenue Service website also offers instructions and tests that could help you review your case and which forms are required to be submitted.
The information given on this blog is a general overview to the gambling requirements stated by the IRS and may vary on each personal case. If you have any doubts of what to do, we encourage you to seek professional advice to keep all your paperwork and taxes in order according to tax laws.