If you’ve listened to any kind of sports podcast recently (the Kelce boys have a particularly fun one), or tuned into any mainstream sports event for that matter, you’ve probably been blitzed with DraftKings ads.
It seems sports betting is more and more common these days and way more accessible than it used to be (like, from your armchair accessible).
And if you’re one of those Staten Island people jumping on the betting trend, there’s no shame in that, BUT…you’ve got to make a plan for the tax implications of your results (win…or lose). And I’m going to discuss that a bit more today for my Staten Island friends who like to live on the edge a little.
Did you file your 2019 taxes? (Yes, I know it’s 2023.) I bring this up because the statute for claiming any refunds for that tax filing year is quickly approaching —- July 17 to be exact. The IRS currently has 1.5 billion in refunds to dole out. If you’re in the “haven’t filed” crowd, you should get on that.
I’m here to help:
And I’m here to help if you have gambling wins and losses to factor into your tax filing as well.
Here’s a baseline to help you figure things out with gambling taxes.
Win or Lose: The Scoop on Gambling Taxes for Staten Island Betters
“Gambling: The sure way of getting nothing for something.” – Wilson Mintzer
It may seem super fun to spin the wheel, roll the dice, and follow the score. However — not everybody loves what often happens next…
If you’re like most people, you’ve placed some kind of gambling bet in your life, maybe in one of the mushrooming online sites like FanDuel or DraftKings, or in one of the also mushrooming in-person casinos across the country. (You’re not alone: It turns out one in five adults say they’ve placed a bet on sports in the past year.)
And, I hate to say it, but you probably lost. Sorry about that…Or maybe you did win.
Either way, I bet you know what question is coming next: How does that affect your taxes?
Gambling taxes for the casual loser
Let’s define gambling losses real quick. They include not only what you lost on the bet(s) but also your related expenses, such as travel to and from a gambling establishment. That’s nice of Uncle Sam — but there are a couple of huge catches:
- Deductible losses cannot be more than the amount of gambling income you report. In other words, you must report all your winnings before you get to your itemized deduction for your losses (under “Other Itemized Deductions” on the Schedule A of your tax return). If you won a thousand, then lost two thousand, you can only potentially deduct a thousand in losses.
- Which brings up the next catch: You can deduct gambling losses only if you itemize your deductions on your tax return and keep a record of your winnings and losses (more on this in a second). And with today’s larger standard deduction, chances are you probably don’t itemize deductions at all.
In short, gambling losses typically don’t do you much good on your taxes, my Staten Island friend.
Gambling taxes when you win
Hey, as they say, you never know…
In case you do hit that jackpot, you should know that gambling winnings are fully taxable as “Other income” and you must report them on your tax return. They include cash winnings and the fair market value of prizes, such as cars, trips, and other prizes that aren’t cash. The payer has to issue you a Form W-2G, “Certain Gambling Winnings,” if you win at least 600 dollars. This threshold is higher for bingo, keno, slot machines, and poker tournaments.
If you win enough, you may have to pay estimated quarterly taxes on the money or have a big chunk withheld from the winnings right on the spot for taxes. (We can help you figure out the estimated taxes.)
You report your winnings and losses separately on your return. And not reporting your winnings is, well…a bad bet.
Keeping good records on gambling taxes
Whether you win or lose, solid records and every piece of paperwork are your best friends.
Keep a diary that contains at least: the date and type of your bets; the name and address of the gambling establishment; the names of others who were there with you; and how much you won or lost. Track your winnings and losses in such categories as “casino games and slot machines,” “poker games,” “sports betting and fantasy sports,” and so forth.
By game, the IRS generally wants to see:
- Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check-cashing records
- A record of the slot machine number and all winnings and the date and time you played the machine
- The number of the table where you played blackjack, roulette, and so on and casino credit card data indicating whether the credit was issued in the pit or at the cashier’s cage
- A record of the number of bingo games played, the cost of your tickets, and amounts collected on winning tickets
- A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost; also unredeemed tickets and payment records from the racetrack
- A record of lottery ticket purchases, dates, winnings, and losses, as well as unredeemed tickets, payment slips, and winnings statements.
Also — hang on to your W-2Gs and, if you have them, your IRS Forms 5754, “Statement by Person(s) Receiving Gambling Winnings.” (You get this if you’re one of a group of winners or not the person who actually won.)
[BEGINBLOG]How going pro affects gambling taxes
If you go pro with gambling, a range of tax opportunities — and obligations — opens.
You’ll file an IRS Schedule C, “Profit and Loss From Business,” with your tax return. You’ll have to pay self-employment tax every quarter, estimated on your winnings. Your losses (since you’ve gone pro) become legit business expenses, as do travel, meals, lodging, professional materials and publications, and other items and expenses. There are state taxation rules that vary state-to-state and may also apply to your gambling.
On that last one, tax rules concerning deductions for running your own business rarely line up with the myths. They also change all the time, so keep us in the loop with things so we can help with gambling taxes.
Wishing you luck,
Anthony R. Mauriello, E.A.