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Be aware of tax implications of gambling wins, losses

Be aware of tax implications of gambling wins, losses

Tax issues can get complicated for frequent gamblers

Win or lose, gamblers at Schenectady’s new casino shouldn’t spend all their winnings or throw away their win/loss report without first thinking about the tax implications.

Veteran Schenectady accountant Dan Ertel said taxes may not be the first thing on anyone’s mind during a casino visit, but they shouldn’t be forgotten altogether, especially by high rollers or frequent gamblers.

Income taxes are due on net winnings; for tax filers who itemize, a deduction is available on losses.

Fortunately, he said, most casinos make the bookkeeping pretty easy, as they can issue a report that shows all money bet, won and lost in conjunction with electronic tracking cards the facility issues to guests.

At Rivers Casino & Resort, that’s the Rush Rewards card given to members of the Players Club, a spokesman said, and Rivers does issue guests a won/loss report based on their activity with the card. There’s also the W-2G tax form Rivers issues to gamblers who score a promotional win of at least $600 or a slot machine jackpot of at least $1,200. Those are for single wins only — ten $500 wins wouldn’t trigger a W-2G, but one $600 win would.

Ertel, who was an IRS agent for a few years before becoming a CPA in 1965, said there are a few key points to keep in mind:

  • Winnings must be reported as income.
  • Losses are deductible, in most cases, on federal and state tax forms, but only up to the amount of winnings, and only if the filer itemizes deductions on Schedule A.
  • Even if losses exceed winnings, the winnings are counted as part of total income, and if they boost total income sufficiently, there can be a ripple effect that includes reductions in other tax benefits and deductions, or taxes suddenly being due on Social Security benefits.

One strategy for the really committed casino patron is declaring oneself a professional gambler. Pursuing gambling as a business is not a step to be undertaken easily or casually, though.

“It gets complicated,” Ertel laughed. "You almost have to be independently wealthy to do it.”

A gambler who pursues gaming full-time with the intention of making a profit from it can legally claim to be professional and deduct associated expenses, such as travel to and from casinos, and more easily deduct losses without that ripple effect elsewhere on their tax returns. On the downside, professional gamblers can face a self-employment tax.

As Ertel said, it’s complicated.

“It’s very hard to pass that test -- that you’re a professional gambler,” he said.

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