Gambling is taxed federally as well locally, as in most states. Iowa has a withholding rule of 5% of your gambling wins, with 24% withheld for federal taxes. With a little planning, you can make sure that reporting your wins is easy next time tax filing season rolls around. There is some good news; you can get deductions on your tax bill based on losses.
As in most states, you’ll need to pay income tax on that windfall. To balance this, you can deduct gambling losses— even if they come from a different form of gambling from your win. As you will see below, making your deductions “audit proof” requires some work.
Also, if a payer of gambling winnings is a nonprofit organization maintaining an office or carrying on activities in Connecticut, the nonprofit organization must withhold Connecticut income tax from a payment of gambling winnings if it is required to withhold federal income tax from the payment and the payment is made to a resident or to someone receiving the payment on behalf of a resident.
For more information, see TB-20(R), Gambling Winnings or Losses. You may be required to substantiate gambling losses used to offset winnings reported on your New Jersey tax return. Evidence of losses can include your losing tickets, a daily log or journal of wins and losses, canceled checks, notes, etc.
My gambling losses exceed my winnings (by a lot unfortunately). Will I still need to pay taxes on the winnings? When I entered the W2-G info into last year's return I couldn't see where the loss statement was, only the winnings entered as extra income.
Gambling winnings are reported as other income on Line 21 of the Federal 1040 tax return. If you itemize your deductions, you can deduct gambling losses you had during the year on Schedule A, line 28 but only up to the total amount of your winnings. You are prohibited from simply reporting the difference between gambling winnings and losses.
Taxpayers’ Accounting and Record Keeping for Gambling Winnings and Losses; Massachusetts will follow federal rules and guidance with regards to accounting for gambling winnings and losses. Under that guidance, whether a taxpayer has gambling winnings or gambling losses is determined per occasion. See CCM AM2008-011.
Gambling losses can be deducted on your federal income tax return. However, they must be itemized on line 28 of Schedule A, Form 1040. You cannot deduct more than your winnings, and expenses related to any gambling or lottery activities cannot be deducted.