Gambling income is money earned from gambling activities at racetracks, lotteries, and casinos. It is a form of taxable income that needs to be declared on financial statements prepared for government tax authorities. Losses from gambling can also be declared to offset taxable earnings, on tax returns where people itemize their deductions to increase tax savings. The precise handling of gambling income can vary by nation, and it is important to be familiar with the tax code before filing statements, to make sure they are accurate.
People may earn money from gambling in a variety of ways, and in some cases, the payout comes with an official tax document. This can be used in the preparation of tax returns and other statements where gambling earnings need to be declared. Such documents are more common with tournament gambling or very large earnings; people participating in a national lottery, for instance, may not get a statement with a small win, but do get one if their earnings on a single ticket exceed a specific threshold.
There may be a space on tax returns to declare gambling income. In other cases, taxpayers declare several different kinds of income on a separate worksheet and input the final amount into the taxable income line on the tax return. Tax forms should come with instructions indicating how to handle different kinds of income and losses so people can be assured they are filling them out right. An accountant can also provide specific advice on handling gambling income.
Tax requirements apply to both amateur and professional gamblers. If people make money from gambling, they need to declare it. Tax authorities tend to pay more attention to people with large winnings, because they can make the best targets for recovering large tax judgments if they falsify their returns, but small-time winners are not exempt from audits. Failing to disclose gambling income can result in needing to pay more taxes and paying a fine.
If a taxpayer wants to deduct gambling losses, these can be declared with other itemized deductions. There may be a limit on the maximum allowable deduction; for example, the Internal Revenue Service (IRS) in the United States does not allow people to deduct more than they won. Receipts and other documentation showing losses should be kept, along with information on winnings, in the event of an audit or if questions arise about accounting on a tax return.