Yes. When you win, your winnings are taxable income, subject to its own tax rules.
The first rule is that you must report all winnings, whether another entity reports them to the government or not. For example, if you hit the trifecta on Derby Day, you must report the winnings as income.
You can’t deduct the cost of your wager from your winnings when determining how much you won, but you can deduct your gambling losses subject to certain rules.
- You must itemize your deductions to claim your gambling losses as a tax deduction.
- This means you can’t take the standard deduction for your filing status, which often amounts to more than a taxpayer’s itemized deductions.
You’re allowed to deduct losses only up to the amount of the gambling income you claimed. So if you won $2000 but lost $5,000, your itemized deduction is limited to $2,000. You can’t use the remaining $3,000 to reduce your other taxable income.
Click HERE for more information on taxability of Gambling winnings.
@Texasman11
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