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Under what circumstances are gross gambling winnings taxable?

User Yousra
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Final answer:

Gross gambling winnings are considered taxable income and must be reported on your federal tax return. Gambling losses can be deducted, only up to the amount of winnings and as an itemized deduction. Keeping detailed records of gambling activities is essential for accurate tax reporting.

Step-by-step explanation:

Under what circumstances are gross gambling winnings taxable? Gross gambling winnings are generally considered taxable income by the Internal Revenue Service (IRS) and must be reported on your federal tax return. Whether you win from slot machines, bingo, horse racing, or any other type of betting activity, you are expected to report your winnings as income. According to the IRS guidelines, taxpayers must report all gambling winnings as income on their tax return. Gambling losses can also be reported, but only as an itemized deduction, and only up to the amount of your winnings.

It's important to note that there are different rules for individuals who are considered professional gamblers. For them, gambling is treated as a business activity and winnings and losses are reported differently. Additionally, certain types of gambling earnings, such as those from tournaments or shows, may have withholding either at the state or federal level.

To ensure compliance with tax laws, it is advisable to keep a detailed log of all gambling activities including the date, the type of gambling, the establishment, the amounts won and lost, and any related documents like W-2G forms provided by casinos. Reporting gambling winnings is a part of determining your adjusted gross income (AGI) which then forms the basis for your taxable income calculation on forms like the 1040EZ.

User Freewalker
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