Can Casino Winnings Be Taxed?
It is often said that there are two things that cannot be avoided in life, death, and taxes. This statement rings true even when it comes to gambling winnings. By law, casino winnings are taxable, and players are required to report on all winnings when they submit their tax returns.
Despite the fact that many people view gambling as merely a hobby, the Internal Revenue Service (IRS) deems all profits generated through gambling as income. And, since all winnings are subject to state and federal income tax, failure to report casino winnings may result in a fine and possible jail sentence.
Go through our guide to discover how the gambling winnings tax calculator works to determine the final amount. Additionally, we have discussed how gambling winnings and losses can be calculated and included in your tax returns. Check out some of our recommended casino sites that you can visit and try your luck at winning life-changing jackpot prizes.
How Much Money Can You Win Gambling Without Paying Taxes
With this information, players can no longer take gambling as just a popular pastime. Now you need to formalize the game by tracking all your casino winnings and losses so that you can include them in your income tax returns.
You need to remember, though, that the rules for claiming this income are different based on whether you are a professional gambler or gambling is a hobby for you. Players that gamble as a hobby can report their winnings as ‘other income’. Gambling losses, on the other hand, can be included under ‘other itemized deductions.
Professional gamblers are only recognized as such if they gamble full time and not recreationally. At this point, your report will reference your income and expenses as self-employed income.
How Do I Prove Gambling Losses on My Taxes
Since players are required to include gambling winnings and losses, they have to keep a detailed record of all bets and the outcome of each wager. The correct details should include the game that is played, the venue or website, the date of the gaming session, the duration of the session, and information of how much money was won and lost.
Additionally, you may be required to produce supporting documents that can be verified. This includes credit records, bank account details that show deposits and withdrawals, casino account records of all transactions.
What Happens if I Don’t Claim My Casino Winnings on My Taxes
It is important to understand that there is a threshold that you need to meet before you get in the crosshairs of the IRS. If you fail to disclose the winnings to the value of $1200, you may get away with it.
If you do not report the winnings of a substantial sum, the IRS will first send you a letter to inform you that they have come across a discrepancy in the report. Failure to heed the call will result in a summons to court where a penalty may be levied for failure to comply.