Many people ask if they must pay taxes on their gambling winnings. The answer is Yes. Gambling winnings are fully taxable and must be reported on your income tax return. You cannot reduce your gambling winnings by your gambling losses; however, you may be able to deduct your losses separately.
You must report the full amount of your winnings as income on line 21 of Form 1040 and claim your losses as an itemized deduction on line 27 of Schedule A. You can write off your losses only to the extent of the gambling winnings you report as income. You can get this deduction only if you itemize deductions. Thus, if you take the standard deduction, you cannot deduct your gambling losses.
In order to keep an accurate record of your gambling winnings and losses, we recommend that you keep a diary. In your diary you should have the dates and types of wagering activity, the name and address of the gambling establishment, as well as the amounts you won or lost. You may even want to write down the names of any people who were present with you at the gambling establishment.
In some cases, you may receive Form W-2G from the payer. You should save this form along with other documentation related to the gambling activity, such as tickets, checks or credit slips that show the amount of both your winnings and losses.
Do not use this article as a substitute for professional advice.
The information in this article is intended to be only a general overview of the topic and may omit details that could be critical to your specific situation. Accordingly, this article should not be construed as rendering legal, tax, or other professional services. Please contact our office for more information on this topic and how it could affect your specific tax or financial situation.