If your NCAA college basketball bracket brought you some winnings, remember that your earnings count as taxable income, and you’ll need to report it when you file your 2011 taxes.
Any gambling winnings should be reported on line 21 of your IRS Form 1040. If you itemize, you can deduct gambling losses, but you cannot report more losses than winnings.
Whether your winnings are subject to federal withholding or not, all gambling winnings should be reported on your 1040. Report such gambling income as:
– Winnings from lotteries
– Horse racing wagers
– Raffle prizes
– Casino winnings
– Office pools and contests
– Fair market value for large non-cash prizes such as cars or trips
Those who list professional gambler as their occupation must also report wins and losses, but can also deduct travel and related expenses ordinary and necessary to their gambling activities. Professional gamblers must show that gambling is a primary income-producing activity and means of support. Although professional gamblers cannot deduct gambling losses that exceed their winnings, other deductible expenses can exceed their gambling income. As a result, professional gamblers can lower their adjusted gross income, and perhaps qualify for other or larger tax breaks, that recreational gamblers cannot. On the down side, however, professional gamblers will likely be subject to self-employment taxes.
Whether you gamble professionally or just for fun, record your wins and losses by keeping printed gaming records including tickets, betting slips, Keno tickets or casino debit/credit information. And if you are lucky enough to be part of a group that shares the proceeds of a winning lottery ticket or large contest, be sure all those in the group file Form 5754 (Statement of Person(s) Receiving Gambling Winnings.
Your accounting professional can also help you through the reporting process.