For those of you watching the World Series very closely-- and maybe you have a betting interest-- you need to know that what happens in Chicago doesn't necessarily stay in Chicago when it comes to the IRS. That goes for Cleveland too. For those of you with a penchant for gambling, I hate to be the proverbial stick-in-the-mud, but you will need to report any gambling winnings as income on your tax return.

It's not all bad news. Itemize and you can deduct gambling losses up to the amount of your winnings. As a gambler, you know when to hold 'em and when to fold 'em, but I'll bet you don't know these 5 tax tips:

1. What the IRS Cares About. Income from gambling includes winnings from the lottery, horse racing and casinos. And that also includes winnings from, shall we say, not strictly legal gambling. The IRS is more interested in the revenue, not its source. Gambling winnings include both cash and non-cash prizes. That means you need to report the fair market value of non-cash prizes like cars and trips.

2. Certain Gambling Winnings. Hurray, you're a winner! Along with your money or prize, the payer may give you a Form W-2G, called Certain Gambling Winnings. It's important that you don't ignore this because the payer also sends a copy of the W-2G to the IRS. The form includes the type of gambling, the amount you win and other factors. You'll also get a form W-2G if the payer needs to withhold income tax from what you win. Are you still having fun?

3. Other Income. Whether or not you get a Form W-2G, remember you have to report all of your gambling winnings as income. You normally report your winnings for the year on your tax return as "Other Income." Your tax advisor can help you with this.

4. How to Deduct Losses. Let's say you weren't so lucky this time. You can deduct your gambling losses on Schedule A, Itemized Deductions. The total you can deduct, however, is limited to the amount of the gambling income you report on your return.

The good news is you can deduct all of your gambling losses against your gains; it doesn't matter if you are playing the lottery or playing a hand of blackjack. For example, some people may remember to deduct their casino expenses, but forget about those weekly lottery tickets. It all counts. If you are married, the gambling winnings and losses of both spouses are combined for tax purposes, if you file jointly.

5. Keep Gambling Receipts. If you read my column, hopefully by now you are a pro at keeping records. Do the same with your wins and losses. Think of this as a gambling log or diary, including receipts, statements or tickets.

6. A Different Take on Bingo Night. It's important to note that those church raffle tickets are a form of gambling, not charitable donations. That also goes for raffles or bingo nights. The IRS considers these to be games of chance, so you can't deduct these costs as a charitable contribution.

In song, Kenny Rogers knew when to "walk away" and when to run. In the case of the IRS, the answer is never. Report everything.

And, gambler, enjoy the journey. I do.

Published on: Oct 31, 2016
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