How Gambling Wins Can Affect Your Taxes
Hollis, NH Resident Hits the Jackpot
Experiencing a big win, whether in a casino, poker tournament, or through some other gambling venture, can feel great. It is important to know that the money that you earn through gambling is taxed by the IRS. By planning accordingly, you can be sure you won’t have any costly surprises at the end of the year. Gambling winnings are considered taxable income in most states, whether this is paid by cash, check, or electronically. This should be accounted for in the income reported for in the year that the money was won, paying the appropriate taxes on this windfall.
A Hollis resident recently hit the jackpot in an out of state casino, winning a substantial amount of money. Concerned about how this might affect her taxes at the end of the year, she contacted the team at Merrimack Tax Associates for advice.
IRS Reporting Requirements for Gambling Winnings
Most gambling establishments report gambling winnings to the IRS, as they are required to do so. Before paying out your money, they will ask for your personal information. This is so that the win can be reported to the IRS, creating a paper trail of your gambling winnings and the money received.
Substantial payouts may already have the taxes withheld from your payable winnings. If the dollar amount is large, the establishment may ask you to complete an IRS Form W-2G. This document will detail the amount you owe and if any taxes are withheld. You can then note any withheld taxes on your winnings when filing your own taxes and reporting this gambling income.
Deducting Gambling Losses
In some cases, you can deduct gambling losses from any winnings accumulated throughout the calendar year. This can partially reduce the taxable income from gambling, saving you money on taxes paid. There are limits on these deductions that vary from state to state and you must itemize deductions to take advantage of this tax write-off.
The Hollis resident set aside a portion of her winnings to pay taxes on this income, ensuring that she will not have any surprises when it comes time to file her taxes for the year.