Avincow
Avincow
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November 23rd, 2015 at 5:49:54 PM permalink
Quote: GWAE

That's not true at all unless he is already itemizing. He could lose 5k for the day and have a w2g for 5k. Unless he is not taking standard deduction he will be paying some taxes on it.



I am either not understanding your argument, or I am not understanding taxes. The following is my understanding (only applied to recreational gamblers):

Yes, you have to itemize in order to deduct losses, I agree.

How do you have a win or loss? If at the end of your gambling session, you have more or less money than what you started with.

So if in a gambling session, you get a w2g for $5000 on your first spin, but actually lose $3000 over the next few hours, your gambling win is $2000. You owe taxes on $2000, not $5000. If you had money withheld during a hand pay, you are entitled to receive some of that money back. (It is calculated this way whether you are itemizing or not)

What is a gambling session? It's not well defined, but it's however you define a continuous gambling activity, such as playing VP for threes hours and then leaving the casino to go home. When you leave the casino, your session is over.

You have to pay taxes on your winning sessions regardless of whether you get a W2G or not. However, you can deduct your losing sessions against the winning sessions. If you get a w2g for $5000, but you lose $5000 the next day, you owe $0 in taxes if you itemize to deduct losses. so you have two gambling sessions. The first you won $5000. The second you lost $5000. You deduct losses from wins. Your win for the year is $0. It has nothing to do with w2gs.

If you don't itemize, win $5000 on day 1, lose $5000 on day 2, and never receive a w2g, how much taxes do you owe? You have to pay taxes on the $5k!
GWAE
GWAE
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November 23rd, 2015 at 6:27:58 PM permalink
Quote: Avincow

I am either not understanding your argument, or I am not understanding taxes. The following is my understanding (only applied to recreational gamblers):

Yes, you have to itemize in order to deduct losses, I agree.

How do you have a win or loss? If at the end of your gambling session, you have more or less money than what you started with.

So if in a gambling session, you get a w2g for $5000 on your first spin, but actually lose $3000 over the next few hours, your gambling win is $2000. You owe taxes on $2000, not $5000. If you had money withheld during a hand pay, you are entitled to receive some of that money back. (It is calculated this way whether you are itemizing or not)

What is a gambling session? It's not well defined, but it's however you define a continuous gambling activity, such as playing VP for threes hours and then leaving the casino to go home. When you leave the casino, your session is over.

You have to pay taxes on your winning sessions regardless of whether you get a W2G or not. However, you can deduct your losing sessions against the winning sessions. If you get a w2g for $5000, but you lose $5000 the next day, you owe $0 in taxes if you itemize to deduct losses. so you have two gambling sessions. The first you won $5000. The second you lost $5000. You deduct losses from wins. Your win for the year is $0. It has nothing to do with w2gs.

If you don't itemize, win $5000 on day 1, lose $5000 on day 2, and never receive a w2g, how much taxes do you owe? You have to pay taxes on the $5k!



When it comes to federal taxes your session is the calendar year. So if you win 5k on your first spin and then give it all back in the same day you will still be taxed on the 5k.

This is the problem with the US tax code when it comes to gambling. Imagine how much worse it will be if they make the w2g amount $600.
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Avincow
Avincow
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November 23rd, 2015 at 7:24:35 PM permalink
Quote: GWAE

When it comes to federal taxes your session is the calendar year. So if you win 5k on your first spin and then give it all back in the same day you will still be taxed on the 5k.

This is the problem with the US tax code when it comes to gambling. Imagine how much worse it will be if they make the w2g amount $600.



I see what you are saying, but the calendar year is made up of gambling sessions. In that example, your gambling session win is $0. You pay no taxes even if you don't deduct losses.

You may have to produce gambling records to prove losses. The reason the $600 threshold is bad is because many gamblers do not keep proper records to prove losses.
GWAE
GWAE
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November 23rd, 2015 at 8:00:47 PM permalink
Quote: Avincow

I see what you are saying, but the calendar year is made up of gambling sessions. In that example, your gambling session win is $0. You pay no taxes even if you don't deduct losses.

You may have to produce gambling records to prove losses. The reason the $600 threshold is bad is because many gamblers do not keep proper records to prove losses.



But only if you itemize. If you take the standard deduction then you can't write off the loses so you would still pay taxes.

Now if you normally take the standard but have 20k in w2gs thay are all cancelled out then you are still going to pay the taxes up to the standard deduction because you would have normally had that amount anyways.

If you do your taxes with software then try it with your return last year. Keep it as is and see what your return is, then add a 20k w2g and put in a 20k loss and you will see that you would have gotten less of a return.

All if this is moot if you already itemize. If you are already doing that then you will pay 0 taxes if you have loses to cover your wins.
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GWAE
GWAE
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November 23rd, 2015 at 8:05:46 PM permalink
Quote: Avincow

I see what you are saying, but the calendar year is made up of gambling sessions. In that example, your gambling session win is $0. You pay no taxes even if you don't deduct losses.

You may have to produce gambling records to prove losses. The reason the $600 threshold is bad is because many gamblers do not keep proper records to prove losses.



Oh if you have a w2g then you must deduct loses to avoid taxes. Just because your session is 0 doesn't mean you don't have to report.

Technically if you win 30 on one machine then lose 30 on another machine and go home; on your taxes you should claim a 30 gambling win and a 30 gambling loss. You are supposed to record all wins and loses regardless if there is a tax for given.
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beachbumbabs
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beachbumbabs
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November 23rd, 2015 at 8:07:49 PM permalink
Quote: GWAE

When it comes to federal taxes your session is the calendar year. So if you win 5k on your first spin and then give it all back in the same day you will still be taxed on the 5k.

This is the problem with the US tax code when it comes to gambling. Imagine how much worse it will be if they make the w2g amount $600.



GWAE,

I don't think this is correct, assuming I understand what you're saying.

To deduct, you must itemize. Your gambling losses can be part of going over the standard deduction threshold.

However, once you are itemizing, your W2g (that has been shown as income on form 1040), will be cancelled out on your schedule A and supplemental sheet showing your gambling losses. You will subtract that for a net gaming of zero (loss claims can't exceed winning amounts - they can only zero you out at best.) So you won't pay taxes on that w2g. It's that easy.
If the House lost every hand, they wouldn't deal the game.
GWAE
GWAE
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November 23rd, 2015 at 8:14:20 PM permalink
Quote: beachbumbabs

GWAE,

I don't think this is correct, assuming I understand what you're saying.

To deduct, you must itemize. Your gambling losses can be part of going over the standard deduction threshold.

However, once you are itemizing, your W2g (that has been shown as income on form 1040), will be cancelled out on your schedule A and supplemental sheet showing your gambling losses. You will subtract that for a net gaming of zero (loss claims can't exceed winning amounts - they can only zero you out at best.) So you won't pay taxes on that w2g. It's that easy.



That is exactly true if you already itemize. If you dont itemize but your gambling loss now puts you to the point where you itemize then you will lose the benefit of the free standard deduction.
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Ibeatyouraces
Ibeatyouraces
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November 23rd, 2015 at 8:29:39 PM permalink
Hire a good tax professional.
DUHHIIIIIIIII HEARD THAT!
zoobrew
zoobrew
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November 23rd, 2015 at 8:30:42 PM permalink
One area of confusion on taxes is the person talking about the official legal way to account for gambling, every individual session needs to be tracked and all the positive sessions plus W2gs need to be counted as income and all the losing sessions listed on schedule A or the way that 99.9999999999% of Americans do it and that is to list only the W2gs as income and then use a yearly lose on schedule A.

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