West Virginia Gambling Winnings

[stef628]

I live in West Virginia and won money at the casino here in West Virginia.  As I understand, gambling money is not taxable in west virginia.  when I put that money in my federal income tax, it moved over to west virginia and is taxing it.  Do I have to claim this money in West Virginia since it is not taxed.  I have other income in West Virginia also.  

[JohnB5677]

Unless winnings were from the West Virginia State Lottery, they are not taxable. Be sure that you posted it correctly.  It should be posted to:

1. Income
2. I’ll choose what I work on
3. Scroll to Less Common Income
4. Select Gambling Winnings

Now you should go to your West Virginia taxes and look for adjustments to Federal Income.

[jasnyder1992]

I'm having the same issue. I have multiple W2Gs plus additional winnings reported and also punched in my losses, leaving my gambling income showing 0.  When I go to my WV State return, it still is taxing my thousands in gambling winnings and my tax liability is through the roof. I'm not seeing any possible adjustments to federal income with regards to gambling. 

[BillM223]

@jasnyder1992

Are you a resident of West Virginia?

If so, the WV gambling winnings are indeed taxable in WV. The WV instructions state that the federal income is to be brought over to the state return (which would include the gambling winnings). There can be additions and subtractions to the federal income, but the instructions for subtractions starting on page 21 don't make any reference to backing out gambling winnings.

So in accordance with the instructions, gambling winnings are taxable in WV.

Note that on page 16 of the instructions (link above), it states:

"The State of West Virginia does not recognize itemized deductions for personal income tax purposes. Consequently, itemized deductions claimed on the federal income tax return cannot be carried to the West Virginia return. Gambling losses claimed as itemized deductions on the federal income tax return cannot be deducted on the West Virginia tax return. Consequently, there is no provision in the West Virginia Code to offset gambling winnings with gambling losses." So it appears to be correct that you owe tax on the full amount and the losses are ignored.

I will note that the advice above is only for nonresidents of WV: Page 15 of the instructions above state:

"West Virginia source income of a nonresident does not include the following income even if it was included in your federal adjusted gross income:  

...

• Gambling winnings, other than prizes awarded by the West Virginia State Lottery as described above, unless you are engaged in the business of gambling (file a Schedule C related to gambling activity for federal income tax purposes) and you engage in that business, trade, profession, or occupation in West Virginia."

So, again, I ask you, are your a resident of WV? If so, you must declare the gambling winnings as income.

[jasnyder1992]

Wow! I totally missed the part where that referred to nonresident.  Yes, I am a WV resident, which essentially means I am 100000% screwed. I can't deduct the losses as WV doesn't allow that, but I'm on the hook for every penny I "won".  Any idea where I go from here?  It will take years of my savings just to pay my tax liability this year and it will be probably 10x worse forbnext year (I got hooked pretty bad on the online casinos).  All that just to break even while gambling. Seems unreal.

[BillM223]

Unfortunately for your situation, the legislature in WV does not want residents to gamble, so, so long as you are a resident in WV, you will be unable to deduct the losses.

One thing you might plot out is if you chose to become a "professional gambler". This is a fairly high bar to pass, but in this case, instead of reporting the winnings on Line 8 of Schedule 1 (1040) as Other Income, you would report the winnings on Schedule C. You would also report the expenses of gambling as expenses on Schedule C (instead of on Schedule A), so this is a back door way into deducting your expenses.

But as I said, proving that you are a "professional gambler" is a high bar, for both the IRS and WV.

To start with, please review this article from the Journal of Accountancy. Note this line: "Because professional gamblers may deduct gambling losses for state income tax purposes, some state tax agencies aggressively challenge a taxpayer's professional gambler status."

If you have another job, you may have difficulty convincing an auditor that you are doing the gambling as something other than a hobby. ""If one's gambling activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby, it is a trade or business." The burden is on the gambler to prove this status."

You need to do a lot of research and perhaps even consult a WV tax professional who has professional gamblers as clients before you go down this path.

[jasnyder1992]

Thank you very much for that reply. It seems as if that is almost my only shot at getting out of this without losing every penny I've ever earned and then some. My WV tax liability this year is nearly as much as my total federal income. I guess that's what I get for being sucked into gambling at such a high level.   I'm numb just thinking that next year's liability could easily exceed 6 figures, all while I'm working a regular job for 16/hr and my gambling is only slightly better than breaking even.

[BillM223]

Or, of course, you could always move across the state border into another state - but not Ohio, because Ohio doesn't allow you to deduct gambling losses either. Read that Journal of Accountancy article carefully, because it lists those states there.

Good luck.

[jasnyder1992]

Unfortunately I was a WV resident on Dec 31 2020 so I'm assuming either way I'd still be on the hook for this year's large state tax liability.  The professional gambler is certainly an interesting route to go, albeit very intimidating.  Seeking help from a tax professional who specializes in gambling would definently give me some peace of mind.  

[DanielV01]

You could always use TurboTax Live if you wish to get that professional assistance (although we also understand that some circumstances are best handled by a professional).  A professional might be able to determine if you have any "gambling sessions" that might allow you a degree of aggregation  to mitigate your winnings you claim to the state.  The following article discusses this:  https://wealthyaccountant.com/2018/12/18/deducting-gambling-losses-with-the-new-tax-bill/

[Jwgroves3]

Wow!!!! After reading this I’m sick to my stomach too. W2G can show you winning 1 million dollars but you put in $999,999 and in reality only won 1 cent but pay taxes in 1 million!!! Things they don’t tell you which this blows my mind. Not right at all! Corruption!! 

[tagteam]

There are some mitigating factors that should be factored into the matrix (as in some of these states exempt casino gambling income).

Regardless, it could be that a case for professional gambler status is easier to make for one who wins $1 million dollars and also loses $999,999 within one tax year.

[Jwgroves3]

I played on 3 different online casinos. 2 I loss money and revived no W2Gs. The other won I received 25 forms saying I won around $900,000 last year over a period of time. When I take all 3 sites I’m positives $1,800 that’s looking at all my depots and Withdrawals. Win loss statements shows I loss money too. Im talking to a CPA Tuesday.  Any advice? 

[jasnyder1992]

A lot of it depends on the state as well. My federal would've been fine, but being a West Virginia resident, I wasn't able to deduct the gambling losses as they don't allow itemized deductions for gambling losses. Had I been filing in a neighboring state, I would have been fine deducting the losses on my state return.  Makes absolutely no sense. Apparently WV would rather bankrupt their residents over casual and admittedly addictive gambling than allow it to be deducted. Especially with the emergence of online betting in many states and the extremely addictive nature of gambling, something needs to be done to help prevent people from being blindsided come tax season. 

[TomD8]

WV isn't the only one.

States that don't allow deduction of gambling losses:   Connecticut, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Ohio, West Virginia, and Wisconsin.