Gambling Winnings And Losses On 1040
Recently I was asked to review a return for a new client. He is a professional gambler and he wanted to make sure his previous tax preparer entered the information correctly. This gave me a perfect opportunity to present a case study to compare the differences between reporting as a person who gambles a few times a year with a person whose main activity during the year is gambling as a professional.
Gambling Winnings & Losses Gambling winnings are reported as Other Income on Schedule 1 (Form 1040) Line 8. While you may be able to deduct your gambling losses, gambling winnings are not directly offset by gambling losses in your tax return. If you itemize deductions, you can deduct your gambling losses for the year on line 28 of Schedule A, Form 1040. You cannot deduct gambling losses that are more than your winnings. It is important to keep an accurate diary or similar record of your gambling winnings and losses. To enter Gambling Losses in TaxSlayer Pro from the Main Menu of the Tax Return (Form 1040), select: Itemized Deductions Menu; Other Miscellaneous Deductions; Gambling Losses to the Extent of Gambling Winnings; NOTE: This is a guide on entering Gambling Winnings and Losses into the TaxSlayer Pro program. This is not intended as tax advice. Amount of your gambling winnings and losses. Any information provided to you on a Form W-2G. The tool is designed for taxpayers who were U.S. Citizens or resident aliens for the entire tax year for which they're inquiring. The amount of gambling losses you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000, or carry it forward to future years.
Gambling Winnings And Losses On 1040 Tax Form
Non-Professional Vs Professional Gambler
Where To Report Gambling Winnings And Losses On 1040
A non-professional gambler receives a W2G from the casino and the reported winnings will flow to Line 21 - Other Income on the Schedule 1 of the 1040. The amount of losses can be taken on the Schedule A Line 16. This deduction is limited to the amount of winnings. Also, the non-professional is not allowed to deduct travel, auto or other expenses related to the gambling activity.
The professional gambler also receives W2G forms, and in many cases, large numbers of W2Gs. When these are entered on the 1040, they are attached to the Schedule C for self employment. With the Schedule C, the taxpayer would be able to deduct resonable travel expenses, auto expenses and of course, the gambling losses - with the same deduction limitation. He would also be able to deduct his Self-Employment Heath Insurance and other deductions related to his business. Another benefit from the Schedule C is that the QBI could potentially give the taxpayer an additional 20% decution.
Gambling Winnings And Losses On 1040 Tax Table
But there is a catch. The total amount of expense deduction on the Schedule C cannot exceed the total amount of winnings and must show that the majority of the income came from gambling.
Outcome of the Review
Gambling Winnings And Losses On 1040 2019
When I reviewed his return, I did find a few errors his previous tax preparer made. The taxpayer had almost 200 W2Gs. The tax preparer had mistakenly marked five of the W2Gs to flow to Line 21 - not the Schedule C. This caused the taxpayer to pay a substantial tax payment in error. I amended the return and my new client recently received his refund check from the IRS.