If you have been thinking that you will go home happily with your gambling winnings, think again. Sorry to burst your bubble, but Uncle Sam requires that you have to report all your gambling winnings. Yes, they are all considered taxable income and unfortunately, there is no escaping this fact. However, in the case that you having gaming losses, there is a way through which you can convert them to your advantage in regards to your tax bill. y8
For those who gamble in their spare time, the steps they have to take when reporting their winnings depend on what kind of gambling in which one partakes, the total amount that they have won, and the ratio of the winnings to the wager.
Whatever type of gambling you participate in, if you hit a good jackpot, you will have to give the Internal Revenue Service your tax details. Also, do not expect to go home with each and every single penny of the cash you won. In addition to that, the payer will eventually cut down your winnings as your federal tax rate will be withheld at 25%.
You will be provided with a Form W-2G to file, demonstrating the amount of money you won and how much tax you paid for it.
It does not matter if you did not win enough money to require filling in the Form W-2G. Regardless if you have won a mere $25, either way, it is your responsibility to report all your gambling winnings to Uncle Sam.
However, you are not necessarily required to pay tax for all of your winnings, no matter how you got them. You can also lessen the total amount of cash the Internal Revenue Service will tax you by letting them know of the losses you made as a part of your total itemized deductions. You will report all your gambling losses on line 28 of Schedule A and then you can then claim the amount of winnings you recorded on your Form 1040, hence getting rid of any taxable income. However, you must ensure that the itemized deduction you claim exceed the standard amount.
You may be able to wipe out taxes on $2,000 you that you won by claiming $2,000 in gambling losses; this still much less than the standard deduction of $5,000. However, if your gambling losses are high enough to aid in pushing up your extensive itemized deductions, then you will be required to fill in your details in Schedule A.