Gambling with taxes
So you decided during 2014 you would take a nice holiday to a resort casino for some relaxation and enjoyment. While on holiday you part take in some gambling activities, (e.g. blackjack, the wheel of fortune, craps, poker, etc.), and of course you win the huge jackpot. But of course, when it comes to gambling income there are some tax ramifications that could either help you, or hurt you.
First of all, unfortunately to say that yes when a person earns and/or receive income from gambling activities, it is taxable income just like any other source of a person’s wages and/or other general income sources. Major casinos do report to the IRS just how much gambling income that you earned and/or received, and would issue a tax form called a W-2G to the recipient of the gambling income that he/she received. This is how the IRS knows about any gambling income earned and/or received by the taxpayer, through these reported W-2Gs. However, these W-2Gs only state a person’s gross gambling income.
Since, these W-2Gs only show the gross gambling income, of course how about gambling losses? After all, as any gambler would know that the odds of winning in a gambling activity is against him/her, otherwise where would the stimulated entertainment come from if a gambler would always win. So, natural for most causal gamblers would sustain a net loss in gambling activities due to the fact that the mathematical odds are substantially against the gambler. So the gross gambling amount on the W-2G would not reflect on how much money the casual gambler spent in order to achieve his/her gambling winnings. So can a person claiming any gambling losses against his/her gambling income on his/her tax returns? The answer is that a person can only claim gambling losses up to his/her gambling winnings. For example, if a person won a $1,000 jackpot at a slot machine, but spent $1,500 on the slot machine, and sustained an actual net gambling loss of $500 ($1,000 gambling income earned minus $1,500 spent on gambling). The gambler could only claim $1,000 of gambling losses, and not the full $1,500 of gambling losses, because the gambler only earned $1,000 of gambling income. However, there is one exception to this rule on the limitation of gambling losses. The exception is that the professional gambler may claim his/her net gambling losses on his gambling activities, because a professional gambler is a full-time gambler, which he/she earns and/or receives as a main source of income from gambling activities.
So, if you have forgotten that win on your casino holiday but then recalled it when you are doing your tax returns, or the IRS reminded you because you forgot to report the gambling income on your tax return, please contact us at email@example.com, and we will be more than happy to assist to see if you actually had gambling losses. Even if you are a professional gambler we can help determine your net gambling losses.