Tax and
Gambling
Confessing
your gambling losses to a spouse may be difficult, but
telling the government about the wins can be even
tougher.
State tax laws on gambling winnings vary, and confusion
abounds about whether gamblers can offset reported
winnings with losses, tax experts say.
John Roth, now an analyst with the tax information
publisher CCH Inc., was working a few years ago for a
national tax preparer when an Illinois client who was a
gambler came in to have her annual return prepared.
"She had basically been playing the same $2,000 over and
over. So on paper she had won about $100,000, but was
down about $100 with all the losses," Roth said.
Because Illinois does not allow deductions for losses,
she owed nearly $6,000 in taxes on the winnings, Roth
said.
"She was furious," he said. "A lot of recreational
gamblers know you can deduct losses from wins on the
federal side, but no one thinks about the state laws."
Marissa Chien, a Las Vegas accountant, said that even
state auditors sometimes make errors on the tax
treatment of winnings.
"The whole field of taxes and gambling is a crapshoot,
pardon the expression," said Chien, who wrote
"Tax Help for the Frugal Gambler"
(Huntington Press, $25) with gambler Jean Scott.
Who needs to spill the beans about gambling income?
Players of lotteries, raffles, casinos and horse and dog
races, as well as winners of non-cash prizes, such as
cars and trips, according to the IRS.
All gambling winnings are supposed to be reported on
line 21 of your Form 1040.
For winners who receive at least $600 (or $1,200 from
bingo and slot machines or $1,500 from keno) and those
winnings are 300 times or more the amount of the wager,
the payer is required to issue a W-2G.
Win more than $5,000? At least 25 percent of the take
may be withheld for federal income tax.
If you itemize deductions, you can claim your gambling
losses on line 27 of Schedule A on the 1040 form, but
you can't deduct more than your winnings.
Check your state tax implications because not all states
allow deductions for losses.
Most important, tax experts say, is to keep meticulous
logs of your gambling outings, recording all wins and
losses. Keep player cards and receipts in case of an
audit.
- Janet Kidd Stewart
www.courant.com
Books By
Jean Scott
More Frugal Gambling -- by Jean Scott;
Buy new: $10.17 --
Used & new from: $8.90
The Frugal Gambler -- by Jean Scott;
Buy new: $10.36 --
Used & new from: $3.48
Million Dollar Video Poker -- by Bob Dancer;
Buy new: $11.53 --
Used & new from: $11.16
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