Every year, about 40 percent of Americans place their bets and get their hopes up, but only a few lucky players take the money home. However, there’s a catch. Even if you win big and feel rich, you may not get to keep all the money. Here’s why!
In many countries, money you win during gambling and online betting is fully taxable, and the Internal Revenue Service (IRS) always ensures you pay. If it’s any solace, gambling losses are deductible if you document your deductions. Though they’re only deductible to the point the amount is offset by your winnings. The important thing is you need to have records to prove your wins and losses.
So, before you head to online betting websites and online casinos for your next bet, make sure you are familiar with the tax laws related to gambling to avoid messing up.
How the Process of Gambling Taxes Works?
In case you win a substantial amount of money – depending on the game – while betting on any legally functioning game of chance, the payer of your earnings will take away 24 percent of the total amount and will give a copy of the IRS form W-G2 to maintain a record of this transaction.
Keep Detailed Records of your Wins and Losses
While you will get the W-G2 form that will report all your tax payments, you should also report all your winnings as other income on your tax return.
All cash and non-cash winnings are subject to taxes. Keep track of the following details each time you gamble.
- The date and type of online betting
- The name of the website you’re gambling at
- The amount you won or lost during each bet
- Related documents like bank slips and payment receipts
You Can Cover Your Losses
One good thing that can come out of losing a bet is that the IRS allows you to deduct the amount you have lost during gambling.
But again, you can only do so up to the number of your gambling winnings. The only thing you need to do is document all your winnings and losses accurately.
Gambling Taxed in the Different States
Some states require the winners to pay for their gambling taxes in the state they won the bet.
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