Avoiding Gambling Taxes
Gaming and gambling wins are fully taxable by the US Government. That means that you can be taxed for the value of any prizes of $600 or more with regard to pull tabs, bingo, keno, tournaments, slots and table games.However, Uncle Sam is only able to make a grab at some of your winnings.
First Things First
If you think positive, you are prepared to win as soon as you leave the house, so you should also join your casinos Players Club right away. Not only will you get comps based on your level of play, but you will also set the foundation for avoiding taxes. By using your Players Club (slot club) card at all time, the casino will track your wins and losses for you, and when you do hit that jackpot, youll be able to offset some of the taxes by claiming a deduction for your other losses against that big win. So, get your card right away. Dont wait until you hit a jackpot!
Suppose you lose $100 on average each week so your gambling entertainment is $5200 for the year.
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If you were to hit a $5,000 jackpot on a slot machine or table game, your overall gaming will be a $200 loss for the year. You cant deduct that $200, but at least you wont get taxed on the $5,000 jackpot!
Unfortunately, there is still an issue with your taxes. You have to claim the $5,000 win because you get a W2G statement from the casino, And, you can only offset that win if you itemize deductions on your taxes.
Some players (especially poker and blackjack players) have claimed they are professional gamblers to avoid taxes. This can be done by claiming your gambling is a business. The IRS doesnt like this idea very much, so expect close scrutiny of your deductions!
Keep Your Receipts
If you do claim gambling as a business, youll be able to claim some things like meals and other expenses, so always keep your receipts. For those people who are just hoping to show they lost money to offset a big jackpot, you wont be able to use these expenses, but you will be able to claim losses in all forms of gambling, even if you dont have a gaming-loss statement from a casino.
Receipts the IRS has stated they will accept include a gaming diary, with actual dates, times and locations of play (and win and loss per entry), receipts, tickets etc. Those tickets can be from all games like bingo, keno, tournament entries, parimutuel and other legal gaming venues.
Taxable and Non-Taxable Wins
The IRS had to set a limit for taxable wins, so they established a baseline of $1,200. That means youll see jackpots on slot machines set at $1,199 to avoid the tax work. Then, the IRS re-calibrated the taxable amount to include any payoff that met two minimums: 300 to 1 payoff and $600 or over. That covers a lot of territory. And, many casinos now supply a 1099 form with any prize from a raffle or drawing and any tournament win, so you may get a taxable for much smaller wins!
When you find that they are demanding a W-9 and are going to issue you a 1099-form, you might want to refuse the prize! That sounds strange, but heres the logic. Suppose the casino is giving away a $500 autographed photo of Ryan Leaf. Do you want to pay taxes on that? If you sell it (for what? $50?) youll still pay taxes on the $500 estimated value!
You certainly wont turn down a nice new car, but keep in mind youll owe taxes on the listed value. Suppose the car is listed as a $35,000 value. If you sell it for $26,000 youll still get taxed on the $35,000 amount! Youll take the car, but youll still hate the tax bill.
Other games have minimum taxable amounts, such as Keno, where the amount seems to be arbitrarily set at $1,500. At table games, that weird 300 to 1 and $600 comes into play. If you play Three-Card-Poker and get a straight flush on the 3-card bonus with a $100 wager, your win is $4,000, but its not taxable, because it was just paid 40-1 (not 300-1).
On the other hand, if you make the $1 side bet at Let-it-Ride and get win $2,000 with that same straight flush, it is taxable. Youll also get a 200 to 1 payoff on your standard bets on that hand. If you have three $10 wagers, thats $2,000 each for a total of $6,000 – and those are not taxable. So, your $6,000 win is not taxable, the $2,000 win is taxable. Make sure the casino doesnt get lazy and try to give your a W2G for the full $8,000 payout!
Taxable Poker Wins
Many casinos offer poker tournaments, and most will give all winners a fully-taxable 1099 form with each win, no matter how small. On the other hand, you can sit down and win $2,500 at a table, get up, cash out, and never hear a peep. Its weird, but thats the way it is. Keep track of each gaming session so you can offset those tournament wins at the end of the year!