So wow.
I hope you stayed up last night – like I did – to catch those baseball games. And by those baseball games, I mean a set of four baseball games that made up what was possibly the greatest night in baseball regular league play. If you didn’t catch it, I highly recommend you click on over to Sports Illustrated and check out some highlights. I’m warning you now, though, that it will be impossible to pick the most gasp inducing moment… Hunter Pence’s bullet home to catch Uggla? Evan Longoria’s walk-off homer in the 12th inning? Scutaro’s inexplicable stop and go in the 8th inning?
It was an amazing night for baseball, no matter who you were rooting for. My beloved Phillies had already captured the division and their play-off spot (they were gunning for a franchise record 102 wins – which they totally clinched, thank you, Charlie Manuel) – and managed to make the game a heart-stopping 13 innings nonetheless. The Cardinals beat up on the Astros early and then they waited to see if they would play another day (literally, a “play in” game with the Braves was on the line). The Rays came back from a 7-0 deficit to stun the Yankees in the 12th inning. And a wild 9 innings in Baltimore lead to Boston’s ouster until next season.
Crazy. Unpredictable. Electric.
And it means that there are a lot of bleary-eyed baseball fans this morning. Some spent last evening cheering wildly, others crying in their nachos wondering how a “sure thing” got away.
I’m also guessing that there was more than a little bit of money riding on some of those games last night – for purely entertainment purposes, of course. Now that the madness has settled a little (just a little), it might be time to figure out how to report those winnings and – I’m sure more than a few – losses.
(You remembered this is a tax blog, right, even if written by a slightly delirious Phillies fan?)
So here’s the scoop on taxes for casual gamblers – in other words, those of you who are not professionals.
You have to report your winnings from gambling even if it comes from your neighbor or the office pool. Just because it doesn’t come from Harrod’s or a shifty looking man who runs his “operation” out of his car doesn’t mean that it’s not reportable for federal income tax purposes. And legal or not, it’s reportable.
In terms of mechanics, you report your winnings on a federal form 1040 (downloads as a pdf) on the oft-neglected line 21, other income. There’s no such line on the form 1040-EZ (sorry).
If you receive a form W-2G, Certain Gambling Winnings, you report the amount in box 1 on your form 1040, line 21 (again, no form 1040-EZ). If you had any federal income tax withheld, you’ll also see an amount in box 2: include that amount on line form 1040 at line 61.
But I’m guessing that more of you are interested in gambling losses this morning… You can only claim gambling losses if you itemize deductions on your Schedule A – it’s considered a miscellaneous itemized deduction not subject to the 2% limit. I know. So it feels like you lose twice if you don’t itemize. Sorry, I don’t make the rules, people.
There are some more rules that relate to gambling losses. You must be able to document your losses by type of loss, date, name and location of the gambling establishment and amount. You’ll want to keep a diary or similar record (a spreadsheet should also work) and be able to provide receipts, tickets, statements or other records showing your losses. Since you and I both know that Vinny isn’t going to give you a receipt – nor the obnoxious winner at the bar where you lost – try your best to secure some decent, contemporaneous record of your loss.
And finally, you cannot deduct more in losses than you report in winnings. Hopefully, this isn’t a problem that you have often.
If you’re having trouble figuring it all out, make sure that you check with your tax professional.
Money on the game or no, be sure and tune in this October for baseball. The race for the World Series promises to be one of the most entertaining in years. Of course, I’m hoping my Phils bring the trophy home (my 7 year old would really like another parade, guys) but anything can happen. That’s why we keep watching.