"The Luck of the Draw!"

I know lots of folks including friends and family members who gamble religiously. I’ve never actually been much of a gambler as my luck is between slim and none, but my friends have so much fun I’ve actually considered giving it a shot.

I've tried several different online sites, the occassional lottery ticket and of course, the office football pool. After some research, I’ve quickly discovered that there are about a zillion online gambling sites.

I decided to check out the IRS site to see what they have to say about gambling and taxes.

Gambling winnings are fully taxable and must be reported on your tax return. You must file Form 1040 (PDF) and include all of your winnings. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. For additional information, refer to Publication 525, Taxable and Nontaxable Income.

A payer is required to issue you a Form W-2G (PDF) if you receive certain gambling winnings or if you have any gambling winnings subject to Federal income tax withholding. All gambling winnings must be reported irrespective as to whether any portion thereof is subject to withholding. in addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax.

You may deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction on Form 1040, Schedule A (PDF). However, the amount of losses you deduct may not be more than the amount of gambling income you have reported on your return. It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. Refer to Publication 529, Miscellaneous Deductions, for more information.

Think I'm gonna stick to those Friday night nickel and dime poker games with my girlfriends, and of course, the occassional lottery ticket. Like Kenny says, "you gotta know when to hold em and know when to fold em......."

S. Raines, Sr. Financial Advisor/Tax Preparer

www.effectur.com