Jackpot: 4 Tips for Reporting Gambling Winnings

At Edge Financial, we don’t believe that your tax return is a place to take risks; reliable, informed tax strategies will not only give you the biggest tax refund, but will also reduce the likelihood you may be audited by the IRS.

But, we understand there’s a reason brightly lit cities like Las Vegas, Reno, and Atlantic City draw crowds year in and year out. Well, aside from the all-you-can-eat buffets!

For some people, gambling can be a relaxing and perfectly pleasant part of a vacation—when enjoyed responsibly and with moderation.

However, we’re not here to talk about the consequences of your casino visit or entry to the mall sweepstakes. Nope! Per usual, we’re here to talk about taxes.

One place you should never roll the dice is on your tax return. After all, the IRS is incredibly experienced at calling your bluff. (Almost as good as we are at mixing metaphors.)

If you’ve hit—or lost—the jackpot this year, or you play enough hands of Texas Hold ‘Em just to be curious, we’re here to offer a handful of tips to help you correctly report your gambling income.

4 Tips for Reporting Gambling Winnings on Your Tax Return

Even if it’s your first time reporting your gambling profits or losses, you might be surprised how simple it is to make sure your tax return is completely IRS-compliant!

Stick to these four tips and come out on top.

1. Report Gambling Winnings and Losses Separately

At a glance, it may seem like you’d report your gambling winnings and losses similarly to how you report capital gains from investments. For investments, you generally subtract your losses from your gains and report that total.

Not exactly! Though gambling does carry risks (though substantially more than most investments), the same process does not apply when you’re filling out your tax return.

Instead, you’ll need to separate your gambling winnings from your gambling losses by itemizing them on the right forms. This is the best path to ensure you report gambling correctly on your taxes—and avoid an IRS audit.

Wondering which forms you’ll need? Read on.

2. Report Your Winnings as Income

If you’re a professional gambler, you’ll have your own set of tax rules to abide by, since most (or all) of your taxable income for a year is earned through gambling.

This article is geared more toward the occasional gambler—somebody who wins a trip, raffle, or hits big at the casino. Even if you aren’t a pro, your full winnings are taxable and will need to be reported as income.

According to the IRS, “Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.”

For the most part, the entity that pays your winnings will also issue you a Form W-2G, Certain Gambling Winnings. On your 1040, you’ll report your gambling winnings as “Other Income,” and in some cases you may also be required to pay an estimated tax on that income.

3. Report Losses on Schedule A

Like we mentioned earlier, taxpayers get tripped up when they start reporting gambling gains and losses the same way they report investment gains and losses.

Since you need to report them separately, instead, you’ll report your losses on Schedule A as “Other Itemized Deductions.”

Two Notes:

1. If you take the standard deduction, you’re not going to get any benefit from deducting your gambling losses—because they’d be an itemized deduction. So, you can only effectively deduct your gambling losses if you’re planning to itemize.
2. If you lost more than you won at the casino this year, you’re out of luck. You can only deduct gambling losses up to the gambling income you reported on your return. So if you haven’t won anything, deducting your losses won’t do much good.

4. Keep Careful Records

This tip isn’t unique to your gambling income; instead, it’s just good practice for all taxpayers. If you’re looking to itemize your winnings, and especially your losses, you’re going to need to keep thorough records.

As the IRS puts it, “…you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses.”

Reporting Gambling Winnings: Don’t Roll the Dice on Your Taxes

Though reporting your gambling income may be a new experience to you, it’s actually fairly easy to understand once you get right down to it. Just remember the four major tips to reporting your gambling winnings and losses, and you can stay on the IRS’s good side while maximizing your tax savings.

In our opinion, that’s the real jackpot anyway.