Question from kathi
March 25, 2007 at 8:36pm
I have a $10,000 gambling winnings to claim as income. I have a statement from the casino that I spent $4513 at the same time which is considered by them to be a gambling loss.....help...Can I show gambling expense of l day, l month or what?
thanks.
All casino winnings are subject to federal taxes. However, the IRS only requires the casinos to report wins over $1,200 on slots and video poker machines or other games such as keno, lottery or horse racing. When you have a win equal to or greater than $1200, you are issued a W-2G form. Question from kathi March 25, 2007 at 8:36pm I have a $10,000 gambling winnings to claim as income. I have a statement from the casino that I spent $4513 at the same time which is considered. A payee of gambling winnings meeting the reporting thresholds for bingo, keno, and slot machines, and a payee of gambling winnings meeting the withholding thresholds from horse racing, dog racing, jai alai, sweepstakes, wagering pools, lotteries, and certain other wagering transactions, but not from a state-conducted lottery, must present two.
Answer: Kathi - You are able to offset gambling losses you had for the year up to the amount of your winnings but only if you itemize your deductions on Form 1040 Schedule A, Itemized Deductions. You include the gambling winnings as income on Form 1040 Line 21, Other Income.
You cannot just subtract your losses from the income you are reporting. We suggest keeping a diary of your losses and winnings. It should contain at least the following information.
1. The date and type of specific wager or wagering activity.
2. The name and address or location of the gambling establishment
3. The names of other person present with you at the gambling establishment.
4. The amounts you won or lost. (You should keep these separate to establish winnings from losses)
In order to get a tax benefit from itemizing your deductions they must exceed your standard deduction. For example if your are single and under 65 your standard deduction is $5,150 for tax year 2006. Your total deductions should exceed that amount to benefit from itemizing.
Itemized deductions include:
- Medical and dental expenses that exceed 7.5% of your adjusted gross income
- Taxes such as real property, state income or state sales tax
- Interest expense such as home mortgage interest
- Contributions to charitable organizations
- Unreimbursed employee business expenses
- Miscellaneous expenses
For more information on itemized deductions please see IRS Publication 17, Your Federal Income Tax, beginning on page 133. IRS forms and publications are available at the IRS Web site at www.IRS.gov in the Forms and Publications section or by calling 1-800-TAX-FORM (1-800-829-3676).
Topic:CASINOS; GAMBLING; INCOME TAX; LEGISLATION;
Location:
GAMBLING; TAXES - INCOME; July 29, 2008 | 2008-R-0448 | |
STATE INCOME TAX DEDUCTION FOR GAMBLING LOSSES | ||
By: Judith Lohman, Chief Analyst | ||
You asked (1) if the legislature has considered proposals to allow taxpayers to deduct gambling losses from gambling winnings when determining Connecticut income tax liability, (2) whether other states with casinos allow deductions for gambling losses for purposes of their state income taxes, and (3) what the revenue loss would be if Connecticut allowed such a deduction.
This report addresses the first two questions. We have referred your request for a revenue loss estimate to the Office of Fiscal Analysis (OFA). OFA will respond in a separate report.
SUMMARY
Gambling winnings are fully taxable for purposes of the Connecticut income tax. Unlike the federal income tax, Connecticut does not allow a taxpayer to deduct gambling losses to offset taxable gambling winnings.
Since 1993, seven proposed bills have been introduced in the General Assembly to change the state income tax to allow a deduction for gambling losses against gambling winnings. All of these bills died in committee without a public hearing.
We surveyed 18 states that have commercial or Indian casinos and state income taxes. Of these, 15 allow taxpayers to deduct gambling losses from gambling winnings. Most of these deductions match the gambling loss deduction provisions of the federal income tax.
CONNECTICUT TAX TREATMENT OF GAMBLING LOSSES AND WINNINGS
Federal law requires a taxpayer to report gambling winnings or “gains,” including money won in casinos, lotteries, raffles, or races; the fair market value of gambling prizes, such as cars or trips; and “comps” or complimentary goods or services that he receives from a casino. He must report winnings as “Other Income” (Line 21) on Form 1040. Thus, winnings are included in federal adjusted gross income (AGI).
If a taxpayer itemizes deductions for federal tax purposes, he may deduct his gambling losses for the year, up to the total amount of his gambling winnings for the same year. The deductions may be noted on Schedule A, along with such other federal tax deductions as state and local taxes, charitable contributions, and home mortgage interest.
The Connecticut state income tax is based on a taxpayer's federal AGI (before deductions – Form 1040, Line 33) and not his federal taxable income (after deductions – Form 1040, Line 39). Thus, the state taxes gambling winnings but does not allow a taxpayer to offset winnings by deducting gambling losses. The Connecticut income tax does not incorporate any federal deductions.
LEGISLATIVE PROPOSALS
A computer search of bills introduced since 1993 yielded seven proposed bills to amend the state income tax to mirror the federal income tax treatment of gambling losses. HB 5323 was introduced in 1999, SBs 380 and 660 in 2001, HB 5152 in 2003, HB 6508 and SB 17 in 2005, and SB 705 in 2007. Six were referred to the Finance, Revenue and Bonding Committee, while SB 705 (2007) was sent to the Public Safety and Security Committee. None of the bills was scheduled for a public hearing and all died in committee.
TAX TREATMENT OF GAMBLING LOSSES IN OTHER STATES
The American Gaming Association and the National Indian Gaming Association websites list states with commercial and Indian casinos, respectively. From these lists, we chose 18 states that have both casinos
(either land-based or riverboat) and state income taxes. Of these, 15 allow taxpayers to deduct gambling losses from gambling winnings when calculating state income tax liability.
Ten of the states either (1) have state income tax provisions that are identical to the federal provision or (2) require taxpayers to calculate state liability starting from federal taxable income, thus automatically incorporating the federal deduction. The remaining five exempt some or all of their state lottery income from state income tax and thus modify the total amount of winnings and deductible losses to exclude tax-exempt lottery winnings. Of the three states other than Connecticut with no loss deduction, Mississippi exempts all in-state gambling income from taxation, so only Mississippi residents' out-of-state gambling winnings are affected.
Table 1 summarizes each state's gambling loss deduction. Information comes from each state's income tax forms and instructions for the 2007 tax year.
TABLE 1: INCOME TAX DEDUCTIONS FOR GAMBLING LOSSES IN 19 STATES
2007 TAX YEAR
State | Deduction for Gambling Losses | Deduction Limit |
Arizona | Yes (taxable winnings exclude up to $5,000 in Arizona lottery winnings) | Total winnings (excluding up to $5,000 in Arizona lottery winnings) |
California | Yes (California lottery income is tax-exempt) | Total winnings (California lottery losses not deductible) |
Colorado | Yes | Total winnings |
Connecticut | No | Not applicable |
Idaho | Yes | Total winnings |
Iowa | Yes | Total winnings |
Kansas | Yes | Total winnings |
Louisiana | Yes | Total winnings |
Michigan | No (Up to $300 of gambling winnings are tax-exempt) | Not applicable |
Minnesota | Yes (not applicable to taxpayers subject to Minnesota alternative minimum tax) | Total winnings |
Mississippi | No (all Mississippi gambling winnings are tax-exempt) | Not applicable |
Montana | Yes | Total winnings |
New Jersey | Yes (New Jersey lottery winnings are tax-exempt) | Total winnings excluding NJ lottery winnings |
New Mexico | Yes | Total winnings |
New York | Yes | Total winnings |
North Carolina | Yes | Total winnings |
North Dakota | Yes | Total winnings |
Oregon | Yes (up to $600 in Oregon lottery winnings is tax-exempt) | Oregon taxable winnings |
Wisconsin | No | Not applicable |
Gambling Winnings In Vegas And State Tax
JSL:tjo