We here at the World Casino Directory have been involved in the gambling business one way or another for many years, and offer our experiences and somewhat broad knowledge to our readers in many ways. We are however not tax advisers and can not offer legal advice. But we can share what we have learned and have come to know as things progress, having our finger on the pulse, so to speak.
It is important for US players to keep in mind that even though your state may allow online gaming (check local laws) and that the 2011 Department of Justice policy decision seems to have removed any doubt about the legality of playing casino or lottery games online (consult an attorney) one thing is certain. The IRS will be interested in your winnings, and always has been.
Many online gamblers in the States have always kept track of their winnings and losses and reported them accordingly, as is the law. But online gambling forums, and blogs for that matter, are not always the best places to get timely and accurate information (consult your tax adviser). Online casino, land casino, lottery, and poker winnings are all subject to tax reporting.
With the national interest recently becoming focused on gambling we have seen a spate of articles, mostly rehashing the same old stuff, about gambling and taxes. Most still leave certain realities unaddressed and allow urban myth to run rampant. We’d like to provide some clarity to one of those widely misunderstood elements of tax law simply as an awareness for our US readers.
All well-informed articles will tell you that you must report gambling winnings as income, and that you can not simply deduct your losses first and report the resulting profit. They will also tell you that you can not write off the loss if you were not at profit for the year. This is true whether or not you receive Form W-2G. But they don’t tell you the mechanism used. And they don’t tell you that even if your losses equal or exceed your winnings, you can experience a net increase in taxes.
Sound complicated? Well, it’s tax code and it always is. Casual gamblers (you don’t have to be a professional to be required to report all winnings) will use the “Other Income” line on Form 1040 to report all winnings. You may also deduct your losses (up to the amount of winnings) as an itemized deduction on Schedule A. Anyone who has done their own taxes and itemized deductions before will tell you that with this mandatory formula there is no assurance that one cancels the other. This reporting requirement affects your modified adjusted gross income, not just your adjusted gross income and may affect the taxes you pay in other areas.
It can affect the amount of Social Security Benefits that are taxable, your ability to make a Roth IRA contribution, your phase out of exemptions and itemized deductions, and the amount of Medicare Part B&D, as well as several other areas. This is simply because your gambling winnings go directly to your modified adjusted gross income – they inflate that total before they are offset by losses. Your modified adjusted gross income is the basis for taxation, relief, and eligibility for many elements before losses can be taken into account.
Again, we are not tax advisers, but we can give you three pieces of sage advice. The first is to follow the applicable laws in regards to gambling in your jurisdiction. The next is to report all winnings from gambling. And the third is to consult legal counsel on the first issue, and a qualified tax adviser on the second issue.
Please follow the link to view the most recent IRS advisory on gambling and taxes entitled; Gambling Winnings Are Always Taxable Income.
We wish you the best of luck wherever and however you choose to gamble. And if you just play for fun without ever being concerned about winning or losing real money we have hundreds of free casino games hosted right here on the site. From Marvel Comics slots, to blackjack and poker, to virtual horse racing games like Derby Day, as well as free scratch games and fixed-odds, arcade, and unique games.