Gambling winnings are fully taxable and must be reported on your tax return. You must file Form 1040 (PDF) and include all of your winnings on line 21. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. For additional information, refer to Publication 525 (PDF), Taxable and Nontaxable Income.

If you receive $600 or more in gambling winnings, the payer generally is required to issue you a Form W-2G (PDF). If you have won more than $5,000, the payer generally is required to withhold 27% of the proceeds for Federal Income Tax. If you did not provide your social security number the payer may have to withhold 30%. For more information on withholding, refer to Publication 505 (PDF), Tax Withholding and Estimated Tax.

You can deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction on Schedule A Form 1040, line 27. However, the amount of losses you deduct cannot be more than the amount of gambling income you have reported on your return. It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. Refer to Publication 529 (PDF), Miscellaneous Deductions, for more information.

Tax Topics & FAQs | 2002 Tax Year Archives | Tax Help Archives | Home