Online casinos in the US have developed to a point where you have to pay attention to all the possible aspects and tips, including tax tips for gambling winnings and losses. There are lots of new opportunities to win more prizes, but you have to know how to deal with the rewards beforehand.
Online gambling is not only about placing bets today, it turned into something much bigger than that. People spend years analyzing the games and generating the right strategies to win. And there are different taxes applied by countries to your rewards and losses. Therefore, no matter if you lose or win, you need to know tax tips. You should also know the list of gambling tax-free countries if you do not want to pay on your rewards (well, no one wants).
So, here are a few of them for you know to know.
Tax Tips for Gambling Winnings and Losses – What to Do With the Deductions?
Well, here is the thing you cannot do with your winnings – you won’t be able to deduct your wager cost the reward. Nevertheless, what you can do is to deduct your losses from it. Some other tax tips for gambling winnings and losses is the following:
Classify your deductions as tax deductions to be able to claim the losses later.
You can deduct losses up to a certain amount. And that’s the amount of the income from gambling that you have claimed.
For instance, you won $3000 but lost $4000. Your deduction will be up to $2000 only and you won’t be able to use the other $3000 in case you want to deduce the taxable income.
Tax Tips for Gambling Winnings and Losses – No Matter How Much You Win, Always Report It
No matter how much you won and from which online gambling sites in the US, you always have to report your winnings. Even if it’s $1 only, you still have to report it on your tax return as “other income”.
You might think but what about non-financial rewards? All you have to do is just report the market value of those as the income.
Just ensure that you report everything right. Do not alter the numbers, do not round numbers – just report what you have. Let’s keep gambling fair.
The Issuance of Form W-2G
Other tax tips for gambling winnings and losses to know are – your prizes should all be noted as “other income”. No matter in which form they are (cash or non-cash).
If you get lucky and win big, you will most probably receive the Form W-2G to report what you won. So, here is what the tax code usually demands from the gambling establishments on the issuance of Form W-2G:
- Horse races with $600 and more
- Bingo, slot machines with $1200
- Keno with $1500
- Poker with $5000
Nevertheless, the rule does not apply to the table games, including Blackjack, Roulette, etc. But that simply means that you will not get the Form W-2G to fill in. You will still have to require your income as well as pay the taxes on them.
Withholding Is Necessary
What do we mean by withholding? That means if you manage to win $5000+ with the payout of 300 times at a minimum, the IRS will demand you to withhold 24% of your rewards. That’s needed for the income taxes. And as mentioned above you will have a W-2G Form that you will have to sign. That will affirm that all the data in the form is correct and valid.
Tax Tips for Gambling Winnings and Losses for Inexperienced and Pro Gamblers
We already touched this issue above, but let’s view it in more detail.
First of all, as we already said, you have to itemize your deductions. The reform of 2017 almost made the standard deduction double, gamblers stopped itemizing. Therefore, if you decided to demand standard deductions, you will lose both the bet and even more because of the inability to deduct the losses. But that mainly concerns inexperienced gamblers.
If you are a pro gambler, you can just deduct the losses you have as the business expenses. This way, you won’t have to itemize your deductions. Nevertheless, make sure that your goal is to make profits and continually play. If it’s just a hobby, you won’t be able to go ahead with this option.
You Have to Report Your Winnings and Losses Separately
Next, in the list of tax tips for gambling winnings and losses – you should be aware of is that you have to report your winnings and losses separately.
Let’s imagine the following. You place the bet for $100 three times. You won one of those bets and received a $400 reward. So, in this case, you cannot report only $100 that you won. All the losses and the winnings must be reported separately.
The Last Thing to Remember
In the end, among our tax tips for gambling winnings and losses, you should remember one important thing. You should not demand the losses as the itemized deductions on the amounts higher than the winnings.
Well, these are all the processes that you should expect if you’re gambling at a safe and reliable website. Therefore, if these processes are not required by the website you gamble at, maybe it’s the time to check the site’s reliability? There are many ways on how to spot fake casinos online as well as how to avoid gambling scams. Thus, you can easily ensure your safety while gambling.