“The ball is tipped, and there you are.” March Madness is officially underway, and while many Americans are dreaming of their own “One Shining Moment” in their office bracket pool. But as tax information company CCH points out, it’s important to keep track of your bracket money and other gambling winnings.
Gambling winnings for the tax reporting year should be listed on line 21 of Internal Revenue Service (IRS) Form 1040. Taxpayers who weren’t as lucky and ended the year in the red can deduct gambling losses if they itemize their taxes using Schedule A (Form 1040), line 28. Taxpayers cannot report gambling losses that are more than their winnings.
Forms of gambling income that must be reported include, but are not limited to:
• Lottery winnings
• Horse racing wagers
• Raffle prizes
• Casino winnings
• Casual/seasonal gambling earnings (i.e. office pools)
• Fair market value for large non-cash prizes (i.e. cars or trips)
Taxpayers should provide Form W-2G for sizeable gambling winnings and all winnings subject to federal tax withholding.
“When reporting gambling wins and losses, you have to keep those numbers separate,” CCH Principal Federal Tax Analyst Mark Luscombe, CPA, said. “You can’t combine your win-loss totals and only report the difference — it really needs to be a clear record of everything you won and lost over the course of the year.”
For more information on reporting gambling wins and losses, watch a video interview with Luscombe.