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As popularity grows for casinos, lotteries and other types of legal gambling, many taxpayers are in the position of having to report winnings on their income tax returns. Here are a few key points to remember.


WINNINGS AND LOSSES ARE REPORTED DIFFERENTLY.

·         Report "gross" winnings (not reduced by losses or expenses) as "other income" on the front of Form 1040.

·         Deduct losses separately as "other miscellaneous" deductions on Schedule A of Form 1040. Losses are not subject to the 2 percent adjusted gross income limit, but the amount of losses that are deductible are capped by the total amount won. In other words, you cannot report an overall gambling loss on your tax return.

·         If you do not itemize (if you take the standard deduction), you cannot deduct losses.



NETTING NOT ALLOWED

·         Winnings should be reported for each successful bet – they cannot be netted.



DOCUMENTATION

·         Keep records to verify items reported on your return.

·         Keep a diary showing date and type of wager, name and address of gambling establishment, amounts won and lost.

·         Keep supporting documents such as hotel bills, airline tickets, gasoline receipts, credit card records and cancelled checks.



-By Charlene Meadows, CPA (Senior manager, Mentor office)


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