Sports betting gets a green light. Don’t forget the IRS will tax it

Personal Finance

As for the taxation of gambling winnings: The new tax law that took effect in 2018 continues to allow winners to deduct their gambling losses up to the amount of gambling income, as long as they itemize their deductions instead of taking the standard deduction. The information gets reported on your Form 1040 as “other income.”

Be aware that because the standard deduction nearly doubled for all taxpayers and most deductions were eliminated, fewer taxpayers are expected to have enough deductions to make itemizing worth it.

Professional gamblers, meanwhile, face other rules for 2018 through 2025: When they deduct their expenses (i.e., traveling to and from a casino), they must add them to their gambling losses when calculating the value of the deduction instead of writing them off separately as a business expense.

More from Personal Finance:
The worst times to travel on Memorial Day weekend
What the new tax law means for your charitable giving
This ‘old-fashioned’ identity theft is just as dangerous as the cyber kind

Generally speaking, if your winnings are above $5,000, the payer, such as a casino, is required to withhold federal taxes. Effective this year, that withholding rate is 24 percent, down from the previous 25 percent.

However, don’t assume the amount withheld is what you’ll actually owe on the money.

“The casino doesn’t know if you make $12,000 a year or $26 million a year,” Smith said. “They withhold at that rate, but they don’t know what tax bracket you’ll be in.”

Taxes also might be withheld on winnings less than $5,000 in certain situations, such as if the amount won is 300 times the original bet (i.e., a $600 win on a $2 bet).

Additionally, depending on how much you win, you’ll receive a Form W-2G from the casino. Even if you do not, the IRS still expects you to pony up at tax time.

Source link

Products You May Like

Articles You May Like

Micron says memory chip recovery is coming later in the year, sending shares higher
Euphoric IPO market may be a troubling sign for stocks
How to teach your kids financial independence and save your retirement
In a search for fixed income, advisors look past mainstream bond funds
Levi Strauss shares soar after second IPO—four experts react

Leave a Reply

Your email address will not be published. Required fields are marked *