Do I Have To Declare My Blackjack Winnings?

by James F. Scully Jr., CPA 

I won $4,000 at Blackjack in Las Vegas last year. Do I have to report it as income? If I do, do I have to report all of it?

Congratulations on your winnings. It's not easy to win large amounts at Blackjack, or 21-as the odds always favor the house. If they didn't, Las Vegas wouldn't exist. But although you are more likely to lose in Vegas than win, Uncle Sam says taxes are owed on what you won. In fact, the IRS requires that casinos provide you with a Form W-2G should you win $600 on a single wager on most games IF the amount won is at least 300 times the wager. (There are higher reporting thresholds for winnings from bingo, slot machines and keno.)

I can't imagine a scenario in which you won $4,000 on a single hand AND it was 300 times your bet, since a Blackjack pays 3 to 2, not 300 to 1. (You would have had to bet $2,666.66 on a hand to have won $4,000 in standard Blackjack. If the odds were 300 to 1, you would have received $799,998!) Nevertheless, the IRS expects you to report all your winnings as they are considered part of your gross income. But you can deduct the bets you lost, so long as they do not exceed the amount you've won. The IRS, however, may ask you to prove that you suffered such losses—not an easy thing if you lost the money while playing Blackjack. (If you are married, you and you wife can combine winnings and losses when reporting on a joint return.)

I'm sure you are not a professional gambler—someone who makes his living primarily by wagering. If you were, the IRS would consider you as being involved in a trade or business. In such a case, you could deduct expenses that are considered ordinary and necessary for the work you do. For example, a professional horserace bettor could deduct the cost of purchasing the Daily Racing Form because the publication handicaps horses.

Regardless, I hope you consider not gambling. If you must gamble, limit the amount you bet to only what you can afford to lose. The odds of winning it big are infinitesimal. But should you ever be lucky enough to win the California lottery or a gigantic slot payout, I suggest you consult a CPA regarding your tax obligations as well as how best to invest that money.

James F. Scully, Jr., CPA, is principal of Scully Accountancy Corp. in Thousand Oaks, CA. You can reach him at (805) 777-7100.

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