Chapter 1: Meet Bob – The Lucky, Unlucky Gambler
Bob is a retired defense contractor who spends his weekends at the casino, sipping club soda and crushing blackjack tables. One lucky night, Bob wins $20,000. His wife cheers, the pit boss nods respectfully—and the IRS quietly adds that number to Bob’s adjusted gross income (AGI).
“Wait, what?” Bob says. “Isn’t this just fun money?”
Sorry, Bob. Uncle Sam sees it differently.
Chapter 2: The IRS Plays, But Only Wins
If you’re lucky enough to score big at the casino—or through lottery tickets, online betting, or fantasy football—the government wants its slice. But when you lose? That’s your problem.
Here’s the twist that stings: you can only deduct gambling losses up to the amount of your winnings, and only if you itemize deductions. If you take the standard deduction (like most Americans), you’re out of luck—your losses don’t count.
Quick Example: Bob wins $20,000 but loses $15,000 throughout the year. He can only deduct $15,000 if he itemizes. If he takes the standard deduction, he gets taxed on the full $20,000.
Chapter 3: AGI – The Snowball Effect
Let’s unpack why adding gambling winnings to your AGI (Adjusted Gross Income) is such a big deal.
1. Social Security Becomes Taxable
When your AGI crosses certain thresholds, up to 85% of your Social Security benefits become taxable. For retirees like Bob, that’s a double whammy: more taxable income and less of a safety net.
2. Health Insurance Subsidies Shrink
If you’re buying insurance through the ACA Marketplace, your premium subsidies are based on your AGI. Gambling income could cause you to lose thousands in subsidies, even for a one-time jackpot.
3. Medicare Premiums Go Up
Medicare Parts B and D premiums are based on your AGI—from two years prior. That means Bob’s blackjack bender in 2023 might cause higher premiums in 2025.
4. Foreign Gambling? There’s a Form for That
If you hold $10,000 or more in foreign online gambling accounts, the IRS requires you to file an FBAR (Report of Foreign Bank and Financial Accounts). The penalties for not doing so are, well, draconian.
Chapter 4: The W-2G Myth
“But they didn’t give me a tax form,” Bob says.
Whether or not the casino issues a Form W-2G, you are required to report all gambling winnings as income. That includes cash, the value of prizes, cars, trips—you name it.
You might get a W-2G for:
- Slot machine or bingo winnings over $1,200
- Keno over $1,500
- Poker tournaments over $5,000
- Raffle prizes over $600
But again, even without a form, the IRS expects you to self-report.
Chapter 5: The Hidden Gotchas
Even small wins can nudge you into unintended tax complications:
- Child Tax Credit & Education Credits: Higher AGI can reduce eligibility for these.
- Earned Income Tax Credit (EITC): Might phase out completely.
- Deduction Phaseouts: Many deductions shrink or vanish as AGI rises.
The IRS doesn’t play games—unless it’s with your deductions.
Chapter 6: Recordkeeping is Key
Keep a gambling log: date, location, type of wager, amount won/lost, and supporting documents (receipts, tickets, bank statements).
This is critical if you plan to deduct your losses and want to survive an audit.
Chapter 7: Don’t Go It Alone
At JS Morlu, we help people like Bob navigate the wild world of gambling-related taxes. Whether you’re a high-roller, a poker night enthusiast, or just had a lucky scratch-off, your financial future shouldn’t be left to chance.
Contact us today for personalized tax planning strategies that protect your winnings and minimize the impact on your overall financial plan.
Want Peace of Mind with Your Taxes?
Whether it’s blackjack in Vegas or bingo in Vienna (Virginia), JS Morlu’s tax planning experts can help you keep more of your winnings and stay compliant.
Schedule a free consultation now at www.jsmorlu.com or give us a call at 703-594-4944.
Let’s turn tax season from a gamble into a win.
