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Gambling Winnings
by Jerry "Jet"
Whittaker
May 19, 2006
Gambling winnings:
Gambling winnings are wholly taxable and must be
reported on Form 1040, Line 21 if you are not a
professional gambler. It is significant to keep an
accurate diary or similar record of your gambling
winnings and gambling losses. If you itemize your tax
deductions on Form 1040, Schedule A, you may subtract
any gambling losses up to the amount of your gambling
winnings on your tax return. If you have no gambling
winnings for the tax year then you cannot remove your
gambling losses on your tax return. The tax subtraction
on your tax return is not subject to the 2% AGI floor.
You cannot deduct your gambling losses directly from the
winnings reported on your Maryland tax return. However,
your losses may meet the criteria as a deduction if you
itemize deductions on your federal and state returns.
Gambling winnings from lotteries
Gambling winnings from lotteries and raffles are
chargeable gambling winnings on your tax return. In
addition to cash gambling winnings, you must comprise of
your tax return bonds, cars, houses, and other non-cash
gambling winnings at their fair market value. If you win
a state lottery prize payable in installments, you must
comprise on your tax return both the annual payments and
any amount designated as interest on the unpaid
gambling winning
installments. Any federal income tax withheld from your
gambling winnings should be incorporated on your tax
return. Be certain to attach your Form W2-G to your tax
return.
Other ways to win the online gambling
If
you accept winnings from Maryland lottery games,
racetrack betting or gambling, you must pay income tax
on the prize money. This would be valid if you were
either a resident of Maryland or a nonresident. If your
winnings total more than $5,000, Maryland income taxes
will mechanically be withheld from your newfound income.
If your prize money totals between $500 and $5,000, you
must file Maryland Form 502D and pay the tax on that
income within 60 days from the time you accept the prize
money. You can maintain a credit for taxes paid with
Form 502D when you file your annual income tax return.
If you are a nonresident and received prize winnings
from a Maryland source, you must calculate your Maryland
income tax by multiplying your gross winnings by a
special nonresident tax rate of 6 percent.
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