Gambling income, including winnings in a jackpot, race, raffle or contest are considered taxable income and must be reported on your tax return. If you win a car or other noncash prizes, the fair market value of the prize is taken.
When Do You Receive Form W-2G?
If a large amount is won in gambling, the organization that is paying the winnings sends Form W-2G, Certain Gambling Winnings, to the winner. The payer is required to send Form W-2G only if the winner receives:
- $1,200 or more in gambling winnings from bingo or slot machines
- $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno
- More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament
- $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager, or
- Any other gambling winnings subject to federal income tax withholding
When the winnings are shared by more than one person, or when the person receiving gambling winnings is not the actual winner, Form 5754, Statement by Person(s) Receiving Gambling Winnings, is used instead of Form W-2G.
For 2016, the payer is required to send copy B and C of Form W-2G to the winner by January 31, 2017. The payer also needs to send Copy A of the form to the IRS by February 28, 2017. For electronic filers, the filing deadline is March 31, 2017.
Deducting Gambling Losses
Gambling losses can be deducted by itemizing your losses on line 28 of Schedule A, Form 1040. Just remember, you cannot deduct more than you winnings.
To find out if you need to claim your gambling winnings or can deduct your gambling losses, you may use a 10 minute IRS interview. You will need the amount of your gambling winnings and losses, your filing status, and any information provided to you on Form W-2G when using this resource.
If you receive Form W-2G, pay taxes on your winnings, or deduct your losses, it is important to keep an accurate record of the precise amounts involved. The receipts, tickets, statements, etc. of each win/loss must be kept to verify the amounts.