Top 10 Tax Rules for Gambling Wins and Losses

In pursuit of winning the office tournament pool? If you hit it big when the final buzzer sounds, you may have some tax considerations to make.

Big and small, wagers in play can significantly shape your clients’ individual tax returns. Here are the top 10 gambling tax rules to keep in mind:

Cash and non-cash gambling winnings are taxable.

Your bracket survived the tournament’s first week intact, and you’re in poll position to clean up the office pool. Regardless if you anticipate a cash payout or a non-cash grand prize, jackpot prizes of all sorts count as taxable.

Special tax reporting is required for a certain threshold of gambling winnings.

Headed to a pool payday of more than $600, or 300 times the wager? New regulations clarify special rules for reporting various gambling wins, including bingo, keno and slot machine winnings.

Gambling losses may be deductible.

Painstakingly built a bracket, only to watch it go bust? Many times the risk of a wager doesn’t translate to a big win. But gambling losses may be deductible when itemizing tax deductions.

Winnings above a certain threshold may have taxes withheld.

Hit the jackpot, whether in a pool or at a casino? Gambling winnings of more than $5,000 may require that tax be withheld before you collect that payout.

Regular gamblers must report winnings and losses separately.

For many people, a one-time bet on a tournament or championship is their only foray into games of chance. But for regular gamblers who routinely take on Lady Luck, they must report how much they win and lose, and not merely the difference between these amounts.

Line 21 is the jackpot…

Winnings from gambling and contests—including office pools—are reported on line 21 of IRS Form 1040.

…but Line 28 on Schedule A is bust.

Losses for the year, meanwhile, are reported on line 28 of Schedule A from Form 1040.

Gambling losses can’t outweigh winnings.

An unlucky streak has its limits when it comes to preparing your tax return. You can’t report gambling losses that total more than your winnings for the year.

Group winners have individual filing responsibilities.

Sharing a big win as part of a group, such as with colleagues or family members, everyone has an individual reporting responsibility. Winners who split a grand prize in groups of more than two each must file Form 5754 with their individual tax returns.

Fantasy sports can have real-world tax implications.

Fantasy sports are treated by some states as gambling rather than a game of skill. Approximately a dozen states now license and tax daily fantasy sports, and another two dozen states are considering introducing these regulations.

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Caroline O'Reilly

Content Marketing Manager

All stories by: Caroline O'Reilly

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