With the end of the year getting closer, I thought I would give you some information on casino reporting and your gambling deductions.
The casino is required to report to the IRS and your state any net winnings on a keno ticket(s) of $1,500 or more. That means if you hit a 10-game multi-race ticket for $10 and “win” $1,500 they will not fill out a form, but very important, you still must report the net win on your taxes.
The difference is if the win generates a W2G it gets included in the AGI (Adjusted Gross Income). Then if you itemize deductions you can deduct gambling losses up to the extent of gambling winnings.
For example, you get a $2,000 W2G for hitting a 6-of-6 at the Pop 80 rate. But in trying to win this 6-of-6 you had non-winning tickets totaling $700. Thus you show the $2,000 income and, if you itemize, you can deduct this $700 gambling loss as it is less than your gambling winnings.
Here is the rub. What if your itemized deductions, including your gambling losses, are less than the standard deduction? Basically you are out of luck, though I would rather win the $2,000 and pay the taxes than not win at all.
If you want, you can ask the casino to withhold taxes so you don’t get a larger tax bill at the end of the year. The best suggestion, of course, is to ask your tax professional as the above advice is just a simple statement. Your tax professional can give you the best advice in these situations.
But if that tax preparer tells you not to report your winnings, find another tax preparer as he or she is telling you to do something that is clearly illegal. No reputable CPA would tell you to be dishonest, but there are some “tax preparers” out there who are not really qualified and they will tell you anything to get your business.
The keno department can give you a win-loss statement the same as the slot club. Also, if you play regularly, keep a daily record of your wins and losses to present to your accountant at tax time. A simple pocket notebook should suffice or even the note pad on your smart phone, which you can later transcribe to paper at your convenience.
There is one playing technique, completely legal, to avoid any problems. Play tickets where the win is less than $1,500 net for a solid hit. That way you just have your daily wins minus your losses to report, and the effect on the AGI will be less. This can be important because some tax credits and deduction qualifications are based on your AGI regardless of how much you can legally deduct to get at your final tax bill. Again, ask your tax preparer what is best.
Sometimes it can get complicated, and even if you ask the IRS you are apt to get different answers from different people in different offices. That is why a good CPA is so helpful. Some may allow you to base your reporting on your net winnings without the W2G’s for the same trip and then add the W2G winnings. Others may say each day is separate.
In my case, I just get the casino printouts or win-loss statement along with my own records and give them to my accountant. The peace of mind from honestly filing your returns with a true professional outweighs the temporary small dollar savings of going the dishonest route.
The gambling pros can do a schedule C but the recreational gambler (you and me) must report the W2G’s in the appropriate space. If you have winnings that didn’t require a W2G, they go on the miscellaneous income line of your return.
And remember, if you do itemize deductions, losses at one gambling game can be deducted from winnings at another gambling game up to the extent of the winnings. Again, consult your tax professional.
Will the tax laws hamper your enjoyment at keno? Not really. You can play a ticket designed to avoid the paperwork (but not your reporting requirement) unless the hit is really big, in which case you can use the winnings for the deductible expense of your tax professional.
The downtown 7-spots are good for this as if you hit 6-of-7 or less your win is very small, and even if you come out net ahead it is just the one line miscellaneous income reporting. But if you hit 7-of-7 at the better downtown casinos – paying up to $17,500 for the hit – you will have enough to set aside money for the taxes and the accountant’s fee, and still have plenty left over.
Remember, the ideas in this column are not to substitute for the advice of a tax professional and neither this paper nor I can take any responsibility for your actions of properly paying your taxes or getting the best tax advice available. There are plenty of good honest CPA’s out there. Consider them another minor expense of your gaming vacation and you cannot go wrong. Hope this helps!
Pesach Kremen is a former UNLV Masters Gaming student, has won and placed in multiple local keno tournaments, and has written several academic papers on Keno. You can reach him at [email protected].