Gambling Winnings And Losses

[jsch24]

Florida-
Hello,
I am in the midst of filing and after entering all of my income, and itemized deductions, I am now entering my W-2G forms. I have quite a few from 2018, totaling around $165k. Sounds great, right? But my casino statement has me at a Net loss of 90k. (Not so great)
So it was my understanding that I can claim as much in losses as wins, which I am doing. However, I went from a $2,500 refund to owing 12k in taxes. I don't understand why this is happening if I am not taking the standard deduction, and am claiming an equal amount in wins and losses. Needless to say, I am in an absolute panic right now, because you know, losing 90k wasn't bad enough. Now I am owing taxes? Please help!

 

[xylene]

You desperately need to talk to a tax pro.

Also - without shame or judgement do I say this: you need to be evaluated for a gambling addiction and to with a professional weigh all the options including inpatient treatment. That is true even if you have an enormous outside income that supports this. You can be rich and be an addict.

 

[jsch24]

I don't disagree, but my focus right now is that tax implications. Everywhere I have read, and everyone I have talked to, the wins and losses if equal, should wash and no taxes should be paid on the winnings.

 

[LdiJ]

I don't disagree, but my focus right now is that tax implications. Everywhere I have read, and everyone I have talked to, the wins and losses if equal, should wash and no taxes should be paid on the winnings.

Again, take yourself to a tax professional. It may be that AMT is kicking in and that is the problem, but no one will be able to tell you for sure until you take all of your stuff to a tax pro.

 

[Taxing Matters]

Florida-
Hello,
I am in the midst of filing and after entering all of my income, and itemized deductions, I am now entering my W-2G forms. I have quite a few from 2018, totaling around $165k. Sounds great, right? But my casino statement has me at a Net loss of 90k. (Not so great)
So it was my understanding that I can claim as much in losses as wins, which I am doing. However, I went from a $2,500 refund to owing 12k in taxes. I don't understand why this is happening if I am not taking the standard deduction, and am claiming an equal amount in wins and losses. Needless to say, I am in an absolute panic right now, because you know, losing 90k wasn't bad enough. Now I am owing taxes? Please help!

Are you filing married, single, Head of Household, or what? And how much non gambling income did you have?

 

[davew9128]

Again, take yourself to a tax professional. It may be that AMT is kicking in and that is the problem, but no one will be able to tell you for sure until you take all of your stuff to a tax pro.

I can't see how it would based on this alone. Gambling losses aren't an AMT preference item. I agree something isn't right though.

 

[LdiJ]

I can't see how it would based on this alone. Gambling losses aren't an AMT preference item. I agree something isn't right though.

I know, but I don't know what all else is on his/her return.

 

[FlyingRon]

There's the dichotomy between gambling income being normal income and gambling losses being a miscellaneous deduction, but that wouldn't account for a $14,500 swing. At most, it would be around $4400.

 

[davew9128]

There's the dichotomy between gambling income being normal income and gambling losses being a miscellaneous deduction, but that wouldn't account for a $14,500 swing. At most, it would be around $4400.

Well under the law as it is now, the only things impacted would be allowable medical deductions and some other adjustments and credits tied into AGI. In a vacuum its anybody's guess.

 

[justalayman]

Florida-
Hello,
I am in the midst of filing and after entering all of my income, and itemized deductions, I am now entering my W-2G forms. I have quite a few from 2018, totaling around $165k. Sounds great, right? But my casino statement has me at a Net loss of 90k. (Not so great)
So it was my understanding that I can claim as much in losses as wins, which I am doing. However, I went from a $2,500 refund to owing 12k in taxes. I don't understand why this is happening if I am not taking the standard deduction, and am claiming an equal amount in wins and losses. Needless to say, I am in an absolute panic right now, because you know, losing 90k wasn't bad enough. Now I am owing taxes? Please help!

So you’re saying you had $165k in winnngs but $255k in losses?

 

[LdiJ]

So you’re saying you had $165k in winnngs but $255k in losses?

He had a net loss of 90k per his win/loss letter. That means that his winnings were 90K less than his losses. So, if he is accurate that his winnings were 165k then his losses would have been 255k.

 

[justalayman]

He had a net loss of 90k per his win/loss letter. That means that his winnings were 90K less than his losses. So, if he is accurate that his winnings were 165k then his losses would have been 255k.

Um, that is what I asked, exactly, if was his intended statement. Not sure what benefit you answering for him is.


But to continue my train of thought


What I read from the op coupled with my layman’s perspective on taxes (which appears to fall inline with the op’s understanding of the issue)

The basic underlying question is: if one is allowed to negate gambling winnings with gambling losses, then how in any situation could end up paying additonal taxes on a zero income attributed to gambling. Are there situations where one is not allowed to negate gambling winnnings with gambling losses?

 

[Taxing Matters]

The basic underlying question is: if one is allowed to negate gambling winnings with gambling losses, then how in any situation could end up paying additonal taxes on a zero income attributed to gambling. Are there situations where one is not allowed to negate gambling winnnings with gambling losses?

I see the thinking: if the losses are allowed to offset the gains how can there be more tax? After all, there is no new addeded income. But you have to look at how dealing the gambling situation affects the entire return. The problem is that in order to do that offset, you have to itemize the deductions to get the losses accounted for.

So, as a starter, if the OP was using the standard deduction to reduce his/her income, that deduction is now gone. If the OP is single, that means his income goes up $12,000 right there. If it was a married filing jointly then that means their income shot up $24,000 from the loss of the standard deduction. And all those excess gambling losses do nothing for that.

Another potential problem here is that the gambling winnings are added into adjusted gross income (AGI) while the losses are subtracted out via the itemized deductions later. That matters because adding all those winnings into AGI can result in the taxpayer getting phased out of various credits and deductions he or she may have claimed. So if the taxpayer was eligible for one or more deductions or credits that are subject to income limitations, adding in that gambling income may well have bumped him/her over the limit, resulting in the loss of those deductions/credits. Even though the gambling losses do effectively get backed out later, it's too late to stop the loss of those AGI sensitive items.

I could go on with other potential ripples effects of this, but without knowing the details of the OP's situation I cannot say what all the those would be. The bottom line though is that this is not just a simple wash of income and expense, like you get on Schedule C. Congress has never wanted to encourage gambling; plenty of federal laws reflect that. And the treatment of gambling winnings fits well in that scheme. You can lose money gambling and still owe Uncle Sam more tax because of it.

 

[justalayman]

I see the thinking: if the losses are allowed to offset the gains how can there be more tax? After all, there is no new addeded income. But you have to look at how dealing the gambling situation affects the entire return. The problem is that in order to do that offset, you have to itemize the deductions to get the losses accounted for.

which op states they are.

But yes, your initial statement does reflect my understanding and I suspect the op’s understanding as well.

I could go on with other potential ripples effects of this, but without knowing the details of the OP's situation I cannot say what all the those would be. The bottom line though is that this is not just a simple wash of income and expense, like you get on Schedule C. Congress has never wanted to encourage gambling; plenty of federal laws reflect that. And the treatment of gambling winnings fits well in that scheme. You can lose money gambling and still owe Uncle Sam more tax because of it.

fair enough.

Hopefully that will help the op understand his situation or at least Help him form questions to seek additional info.

Thanks.

 

[Taxing Matters]

Hopefully that will help the op understand his situation or at least Help him form questions to seek additional info.

Yes, hopefully it will help the OP a little bit to see at least some of what is causing the additional tax. That's not likely to make the OP happy; I've seen a few people in this kind of situation before in my career. The gambling losses already hit them hard, and to find out that they then have to pay more in tax because of it kind of feels like hitting a guy when he's down. But that's the way Congress wrote the law.