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- How To Take Gambling Losses On Taxes
- Irs Rules On Gambling Winnings And Losses
- How To Make Back Gambling Losses
- Deductible Gambling Losses
- Can Gambling Losses Be Deductible
How to Deduct Gambling Losses on Your Taxes. If your losses are greater than your winnings, then only the amount of losses equal to your winnings will count. For example, if you have $4,000 of winnings and $6,000 of losses, then only $4,000 of losses will be potentially deductible. The other $2,000 cannot be used. Gambling losses can be claimed but once again – only to the amount of the winnings. Just like in the UK, you can’t take the loss out of the amount you’ve won and declare only that amount as a taxable income.
Lottery Lovers’ Paradise
You’re an avid lottery player, but you don’t seem to be gaining much? That’s ok, especially if you live in the UK. The country is a heaven for lottery lovers, even if they aren’t particularly lucky. Why is that so? Two words – tax deductions.
Gambling losses in the UK are tax-deductible, hurray! Before starting to rub your hands together and make plans about all of the money you’re going to save on taxes, however, we need to warn you that there’s a twist (isn’t there always a one?). The gambling losses are deductible but to the extent of your winning.
Yep, it does sound a bit confusing. Maybe breaking it down and examining the details will shed some light on what has to happen for your gambling losses to lower your taxes and make you one happy camper.
Alright Kids Here’s How to Minimize Your Gambling Losses
As already mentioned, these tax benefits apply to residents of the UK.
It’s nothing but logical that gambling winning will be added to your taxable income. When it comes to deducing losses from your taxes, things get to be a bit more complicated than that.
The first and the most important rule for monetizing your gambling losses is to keep accurate track of all activities. The activities that fall under such regulations include playing casino games, lotteries, raffles, and other types of gambling games. You may want to keep receipts for the fun and exciting time of the year known as tax season.
Anyone who has acquired gambling income during the year will have to fill out a gambling winnings form alongside the official tax statement. This form will also have to be filled out in the case that non-cash awards have been acquired (real estate, cars, appliances, etc.). You’ll need to list the fair market value (FMV) of the item – this is the selling price of each item. Finding the selling price could be a bit of a challenge, so you may want to consult a professional about listing your winnings.
But enough about the lucky people who’ve gotten money, cars, and boats. This article is dedicated to the losers. As it stands, the chances are that it addresses the vast majority of lottery players. Oh well, it wouldn’t be as fun if it were easy, wouldn’t it?
Now, here’s the tricky part – you can deduct your losses as an itemized deduction. You can’t take the amount you’ve lost out of the amount you’ve won and report the difference as your income. If it worked that way, the chances are that many people wouldn’t owe the government any taxes at all.
Also, keep in mind that gambling losses can’t be reported over the amount of your gambling winnings. If you’ve won 1,500 pounds during the year, for example, your gambling losses reported as an itemized deduction can’t exceed 1,500 pounds. Told you it was a bit tricky!
Since going through the documents and filling all of that information correctly may be a bit challenging, it’s always a good idea to have a professional do the job for you. Indeed, you’ll have to pay for the service, but it can save you a lot of money that you’ll otherwise have to spend in taxes because you didn’t make the right calculations.
Gambling Losses Tax Claims in the US?
So, how about doing what UK folks can do in the US? Is it possible to deduce gambling losses from taxation? Here’s what IRS has to say about the topic.
Just like in the case of being a lucky winner in the Kingdom, you’ll have to include your gambling winnings in your taxable income amount. According to the IRS website, raffle, lottery, horserace and casino winnings will all be subjected to taxes.
Gambling losses can be claimed but once again – only to the amount of the winnings. Just like in the UK, you can’t take the loss out of the amount you’ve won and declare only that amount as a taxable income.
To deduct gambling losses, you should have kept all the receipts, the losing tickets, statements, and any other documents that prove the amount you’ve spent on gambling activities and the amount you’ve lost. If you need any additional information about the proof you should have or the procedure enabling you to deduct gambling losses from your taxes, you can call 800-TAX-FORM (800-829-3676).
Big Brother’s Watching You?
By this point, you may be thinking that we’re nuts. After all, lotteries are cash businesses and a governmental entity like the IRS in the US will have no way of knowing just how much you’ve won and lost during the year. Is there any point of declaring winnings and losses whatsoever? Isn’t it better to keep it quiet and avoid taxation?
Unfortunately, it doesn’t work this way.
Gambling establishments in the US and the UK are expected to provide governmental agencies information about winnings that exceed a certain amount.
In the US, this amount is 1,200 dollars for casino wins, and 1,500 for lottery wins. If this income isn’t listed on the tax return, the chances are that you’re going to get in trouble. Still, if you’re an avid lottery fan, the chances are that you have at least some losses that will counterbalance the taxable income and decrease the amount of money you’ll have to give the state.
Once again, we’ll encourage you strongly to find a taxation expert that specializes in gambling losses and winnings before filling out those forms. A small mistake could get you in trouble!
And a final thing – if you’re a classified as a professional gambler, the rules will be different for you. Only a few individuals will qualify as professional gamblers, and these individuals are usually subjected to more lenient taxation procedures. Bummer!
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How To Take Gambling Losses On Taxes
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LSU Fan
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LSU Fan
Baton Rouge, LA
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LSU Fan
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quote:
Im not sure where in the Carribean you would pay 1000.25 per person to fly to. I did print out the booking data from delta.
Depends on the fare class of the ticket... There are more than you think
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LSU Fan
Baton Rouge, LA
Member since Dec 2004
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USA Fan
The Batcave
Member since Mar 2011
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Online
Example:
You win $5,000 in 2012 and lose $7,500. You can only deduct $5,000 of the losses.
You win $5,0000 in 2012 and lose $4,000. You can deduct the whole $4,000 since it is less than your winnings. You would be responsible for taxes on the remaining $1,000 of you winnings.
LSU Fan
Baton Rouge, LA
Member since Dec 2004
49125 posts
If I had 25k in gambling losses and won a 25k MSRP car in a drawing vs 25k in gambling losses and won a 25k MSRP car at the casino slot.
Seems to be that they are not treated equally. In one case I would get to duduct but in the other case I would be stuck with the 25k income. At which I could claim FMV of the car as being around 19k instead of 25k.
Atlanta Falcons Fan
Houston
Member since Dec 2007
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Irs Rules On Gambling Winnings And Losses
quote:
What is crazy is that they valued them at 4k but they dont bother take into account that we literally had 2 days only to book
Interesting way to reduce losses by an airlines...
USA Fan
The Batcave
Member since Mar 2011
9273 posts
Online
quote:
If I had 25k in gambling losses and won a 25k MSRP car in a drawing vs 25k in gambling losses and won a 25k MSRP car at the casino slot.
I see what you're saying and I'm not exactly sure what the IRS uses as the definition of 'gambling.' To me, it would seem that if you paid for a chance to win something, then that would be gambling. There is also the issue of people doing those sort of raffles as a charity (like St. Jude Dream Home) and then writing off the cost of the ticket as a donation. I really don't know all the ends and outs but I'm sure Poodlebrain could fill in the gaps.
Prizes and awards.
If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include it in your income. For example, if you win a $50 prize in a photography contest, you must report this income on Form 1040, line 21. If you refuse to accept a prize, do not include its value in your income. Prizes and awards in goods or services must be included in your income at their fair
market value.
I think the bolded part gives you your answer - the instructions are telling you to report it on a different line than where you would report gambling losses. So I don't think you can offset.
LSU Fan
Baton Rouge, LA
Member since Dec 2004
49125 posts
I also had to pay the international taxes to fly to Nassau. That is normally included in the ticket price. So Im guessing I could reduce the winnings by the 95 dollars per ticket I incured there as well since I have that documented. Likely I will just keep my printout of the real cost and use that to determine FMV.
Navy Fan
perfectanschlagen
Member since May 2008
9961 posts
How To Make Back Gambling Losses
You really should get contemporaneous documentation, however, as claiming something less than what is shown on the 1099 just might invite an audit. However, if you don't want to risk an audit (because you may have other 'iffy' items on your return), there is a method by which you can call the IRS and file a Form 4598 to get the prize company to issue a corrected 1099.
As far as deducting losses, you're out of luck. The IRS takes the position that sweepstakes type winning (where you don't really have to do anything but enter -- i.e., you're not putting up any of your money to get a chance to 'win') are not considered 'gambling winnings' and therefore cannot be offset by gambling losses.
LSU Fan
Baton Rouge, LA
Member since Dec 2004
49125 posts
Navy Fan
perfectanschlagen
Member since May 2008
9961 posts
Again, your shit-out-of-luck with the gambling losses.
Deductible Gambling Losses
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