Question: For those of us who really like going up to Blackhawk and trying our luck, can you tell me what I need to know in terms of what the IRS will need to know if I win big?
First, I truly hope you do win big but you should know statistically it is very unlikely. I never gamble. It feels like I am basically throwing money into the gullet of a machine and I find no satisfaction from that whatsoever. I would much rather go to an amazing show or get a massage. But for some people this is a great form of entertainment. I have known people who have gone through their life savings gambling, it can be as highly addictive as a drug. Enough of my soap box, what to do now from a tax point of view if you win?
Whatever amount you win over a certain amount, the casino will issue you a W-2G. You need to provide ID etc and bring this form to your tax appointment. However, whether or not the casino issues you a W-2G, you do need to report all your gambling winnings. You do have the option of having the casino hold taxes on your winnings which I would highly recommend. Nothing is worse than owing taxes!
THIS IS IMPORTANT: You should keep track of all your gambling “investments” because if you itemize you can deduct your losses UP TO your winnings. So for example, you win $1,500 playing blackjack and you spent $2000 trying to win that money. You can deduct $1,500 of the losses against the gains making the net gambling earnings zero. You cannot take losses more than winnings, you can only deduct losses up to the amount you won. Make sure to keep really good records. Keep a list of the dates you went and how much you spent gambling total for the year, this will go against what you won for the year. Some casinos have reports available to you for this purpose.
ALL OF THIS IS GOOD NEWS….EXCEPT if you don’t itemize but take the standard deduction instead, your losses won’t help you and you will have to pay taxes on your winnings. This is why I recommend you always have the taxes withheld if you have the options to do so.
What do you think? Any questions on this? Leave a comment below 🙂 Also feel free to share.