The Super Bowl is behind us, and March Madness is coming up fast, so we're smack in the middle of the two largest gambling-related events of the year. And with warmer days on the horizon, spring means one thing to me — the NCAA basketball tourney. Soon it will be time to fill in my brackets and win some of my friends' money!
Beating your friends' college basketball brackets every year leaves one with many bragging rights (although, not many friends). Just don’t forget to count your winnings at tax time — or those same friends may get the last laugh!
Whether you win at poker, a Super Bowl bet, a March Madness bracket, craps, or even bingo, all gambling earnings are considered taxable income by the IRS. To make sure you're following IRS guidelines in filing your earnings correctly, here are a few things you should know:
- Whether you have magically hit the lottery or earned some extra cash from a workplace bet, you have to report ALL your gambling winnings on your tax return. This goes for non-cash prizes, too!
- If you're down on your luck, gambling losses can be deducted. This may prove to be confusing and difficult so it is best to ask your tax preparer to assist you.
- Keep all documentation of your gambling activities. Better to be safe than sorry!
- If you win big, keep an eye out for Form W-2G in the mail because you will most likely receive this from the payer of your winnings. A copy of this goes to the IRS, as well, so be sure to include your earnings under the “Other Income” line of your return. If you don’t receive this form, record your earnings anyway. You should receive a W-2G if one of the following:
- The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine
- The winnings (reduced by the wager) are $1,500 or more from a keno game
- The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament
- The winnings (except winnings from bingo, slot machines, keno, and poker tournaments) reduced, at the option of the payer, by the wager are $600 or more and at least 300 times the amount of the wager
- The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding)
See more information regarding gambling earnings on IRS Publication 525 or Publication 529. And be careful when you wager to be sure not to gamble more than you can afford to lose. Because unlike having to pay taxes, no bet is a sure thing.
For more helpful tax information, contact Liberty Tax® directly at 1-877-at-Liberty, or schedule an appointment for or visit a conveniently located Liberty Tax® office near you. For real-time updates, follow Liberty Tax® on Facebook and Twitter.