Taxes take a big chunk out of your money but taxes are very important as this serves as the bloodline of any government. Without taxes, the government will not have funds to get projected started to or will not be able to function well. This is why it is very important to pay taxes.
But like any other citizens, you probably want to find a way to lower the taxes that you pay and one possible way is to use gambling losses for tax deduction. This is a legal way of reducing your tax but it is important to use this tax deduction responsibly.
Using gambling losses for tax deduction follows a simple process. All you’ll need are supporting documents to prove your gambling losses. Here is a simple guide that you could follow to help you learn how to use gambling losses as tax deductions.
- Create a gambling journal. Having a gambling journal will serve as your records in case the IRS wants to check it. Also, it will reduce the tax bite in case you get to have a large winning. Place all important information about your gambling activities like the date, amount won or lost, place of the gambling establishment and type of wager. You can choose the format of your gambling journal. You can place columns with the headings or you can write it in a paragraph form, it doesn’t really matter as long as you have all the important information.
- Declare any of your gambling winnings. When you are filing your taxes and you are filling up the IRS Form 1040, it is important that you declare all of your gambling winnings on the 21st line of the form. Also declare all winnings reported to you in the Form W-2G, which the IRS will supply. Include all of the withheld amount for taxes by the gambling establishment in the 64th line that is labeled as “Federal income tax withheld from Forms W-2 and 1099” in IRS Form 1040.
- Prepare gambling losses documents. It is important that you have supporting documents to verify all of your gambling losses. Keep original or photocopies of losing lotto, racing, KENO and other wagering tickets. Also, keep any credit card records, bank withdrawal records, casino records and other documents to prove your gambling losses.
- Declare any of your gambling losses. In the IRS Form 1040, you can declare all of your gambling losses in the 27th line of the form. This is labeled as “Other Miscellaneous Deductions” and the amount that you declare in this line should not exceed the gambling winnings that you declared in the 21st line of the same form.
Use the IRS Form 5754 if you are sharing your gambling winnings wit
others. Be responsible in declaring the correct amount of gambling
winnings. Do not just declare an amount of gambling winnings that can
cover up your gambling losses. The consequences for false declarations
are not something that you would want to experience. That is why
whenever you file your taxes always make sure to be responsible and
honest to avoid any unfavorable consequences.