The gambling industry in America is booming more than ever before. Las Vegas is thriving, and land-based casinos are popping up everywhere. Not to mention the amount of new online casinos that populates the online space. Gambling has always been a fast way to make more money for those who engage in it. Thanks to technological advancements and the emergence of online casinos, we can now make money online right from the comfort of our homes. People play casino games for different reasons, but one goal is clear – to secure a big win.
However, if, after a thrilling experience playing casino games, you’re lucky enough to make some winnings, it is quite unfortunate that you do not get to keep every penny. The Internal Revenue Service (IRS) considers gambling winnings income, hence fully taxable.
According to a gambling expert, Klara Czerwinska, „Hazard to dodatkowe źródło dochodu, dlatego wygrane w kasynach, jak zresztą każda inna wypłata w hazardzie, jest przychodem i musi być opodatkowana przez IRS. Grając w gry kasyna internetowe opinie mówią, że należy oddać rządowi swój procent od każdej wygranej. Potraktuj to jako wartość, którą musisz zapłacić, za możliwość rozgrywki, ułatwienia i dobrą zabawę”
Paying tax on all your casino income is compulsory as you must give the government what they are entitled to. But then, sometimes, these payments can create a big hole in your winning bags. This article will examine how you can reduce tax payments from your profits.
1. Report Winnings and Losses Separately
Before securing your big casino winning, chances are you have lost a couple of times. Well, the good news is that your gambling losses might be deductible. These losses include the number of wagers and other related expenses like the cost of travelling to and from a casino, accommodation, etcetera.
However, you must report your winnings and losses separately to be eligible for these deductions. For instance, you made three separate $50 bets on any casino game, and all lost except one, which came through with a payout of $200. You must report the entire $200 as income. You should not deduct your losses ($150) from your winnings ($200) and only report the difference ($50) as income. If you itemize by reporting your winnings and losses separately, you can get the cost of your losses deducted by the IRS before they tax your remaining income.
There is another catch; you cannot deduct losses that are more than the winnings you report on your return. That means, if you won $1000 on a bet and lost about $2000 on a few others, you can only deduct the first $1000 of losses from your winnings.
2. Keep Good Records
No doubt, keeping records of all your gaming wins and losses is not an easy task. However, it is something you have to do if you want your tax payments reduced from your casino winnings. To help you track how much you have won or lost over a certain period, you can keep a diary or similar record of all your gambling activities.
Any record you keep should contain the dates and types of specific wagers, the amount you won and lost, the name and location of every casino you visited, and the identity and contact information of other people with you at each casino, etcetera.
As evidence, it will also help if you keep proof of your winnings and losses. For instance, you can hold on to all your wagering tickets, bank withdrawals, credit records, canceled checks, W-2G forms, statements of actual wins provided by the casinos, etcetera.
3. Always Bear the IRS Withholding Policy in Mind
Generally, the IRS has mandated all casinos (online and offline), as well as other niches in the gambling industry, to withhold 24% of all winnings more than $5,000 on a wager, and the payout is at least 300 times the amount of the stake as income taxes.
However, winnings from keno, slot machines, bingo, and poker tournaments have special withholding rules. Bearing this knowledge in mind, you would want to ensure your stakes and payouts do not fall within the criteria the IRS listed for a 24% withholding of your casino winnings.
4. Look at State and Local Rules before You Play
It is very popular to see people travel to big cities like Las Vegas, Nevada, and New Jersey, to plunk down a bet as portrayed in the movies. However, before you travel to another state to place some bets, you should learn what that state wants from your winnings since the state where you live will generally tax all your income (gambling winnings inclusive) to avoid being taxed twice.
In situations where you are not taxed twice, you may or may not be eligible for gambling loss deductions on your state tax return. Consider checking with your state tax department for all the rules that apply to gambling winnings.
Conclusion
Playing online casino games has been conceived by many as a way of making fast and easy money online. However, like all incomes, casino winnings will also be taxed.
Examined above are ways to reduce tax payments on your casino incomes. Keep them close to your heart should in case you secure a big win tomorrow.
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Have you ever wondered how to reduce tax payments from your casino winnings? This article will shed some light on how you can do that.
