W2G - How to avoid the increase in Adjusted Gross Income

[tsmith117]

I have approximately $250,000 in W2G statements that I believe must be reported on Schedule 1.  I also have more than $250,000 in gambling losses to offset this income and therefore will have $0.00 tax liability.  However, by reporting this $250,000 it increases my Adjusted Gross Income to a level where I no longer have the ability to write of medical expenses (Which are directly tied to my Adjusted Gross Income)  Additionally, my Medicare Part B premium will be increased by $400 per month because my Medicare Premium is also tied to my Adjusted Gross Income.

No tax liability because my gambling losses offset my gambling winnings - however the W2G's have changed my deduction percentages and my Medicare Premium and although there is no tax liability - I am losing close to $10,000 because of the inflated Adjusted Gross Income - how can I offset this Adjusted Gross Income to eliminate this jeopardy?

[xmasbaby0 · Accepted solution]

You are expecting your losses to offset your winnings dollar for dollar ----and it does not work that way.   Winnings are taxable income.   Losses are an itemized deduction that go on Schedule A.   They are only deductible up to the amount of tax withheld from all of your other income combined.

Gambling

To enter the W-2G  or other documents For your Gambling winnings--Go to Federal>Wages & Income>Less Common Income>Gambling Winnings

You can enter your winnings, and then keep clicking through the interview to enter gambling losses.

https://www.irs.gov/help/ita/how-do-i-claim-my-gambling-winnings-and-or-losses

Gambling winnings are taxable income.  Losses are an itemized deduction.  If you do not have enough itemized deductions to exceed your standard deduction, your losses will have no effect.

https://blog.turbotax.intuit.com/income-and-investments/how-are-gambling-winnings-taxed-8891/

2024 STANDARD DEDUCTION AMOUNTS

SINGLE $14,600    (65 or older/legally blind + $1950)

MARRIED FILING SEPARATELY $14,600    (65 or older/legally blind + $1550)

MARRIED FILING JOINTLY $29,200    (65 or older/legally blind + $1550)

HEAD OF HOUSEHOLD $21,900    (65 or older/legally blind + $1950)

[iamhankiam]

This is confusing (specifically the second sentence regarding tax withheld:  "Losses are an itemized deduction that go on Schedule A. They are only deductible up to the amount of tax withheld from all of your other income combined."

Per my experiences in TurboTax, losses are only deductible up to the amount of the gambling winnings.  Also, per the IRS Interactive Tax Assistant:  "The amount you deduct for gambling losses cannot exceed the amount of gambling winnings you report."

[Mike9241]

more correctly, gambling losses are only deductible to the extent of gambling winnings. the deduction is on schedule A. the fact that your medical expense deduction will be eliminated should be of no federal consequence if your taxable income without this deduction is already zero. or a loss. however, if you have a state income tax this might have an effect.

failure to properly report your gambling winnings can result in civil and/or criminal penalties

In extreme cases, not reporting winnings can lead to criminal tax fraud charges—up to 5 years in prison and a $250,000 fine. The IRS has already convicted dozens for this.

and of course, Social Security would seek to recover those underpaid premiums, probably by taking it out of your social security benefits to the maximum each period allowed by law.