Today I want to discuss gambling winnings and losses. All gambling winnings are taxable and should be reported on your federal and state tax returns (California State Lottery winnings are not taxable in California and don’t have to be reported on your CA return). Gambling losses are deductible as a miscellaneous itemized deduction not subject to the 2% exclusion, but if you don’t itemize your deductions you can’t deduct them. Gambling losses can only be deducted up to the amount of gambling winnings, so they zero out. Certain gambling winnings are required to be reported by the casino on a form 1099G and there may be withholding taken out, so you have to file your federal tax return to get the money back. Keep a log of casino gambling activities plus cashier receipts and horseracing tickets, etc to verify your gambling deductions, Here is a link to the IRS regarding gambling income and losses:http://www.irs.gov/taxtopics/tc419.htmlYou can always call me if you become a millionare in the lottery or other gambling and we will discuss tax strategy and how much money you are willing to lend me.
Brian’s Tax Musings
Well the House has started working on repealing the health care package passed last year. I know they feel they have a mandate to do this, but it seems like a waste of time. They will pass the repeal since the Republicans have a majority there and want the repeal, then it will go to the Senate, where it will never come to the floor since the Democrats have a majority there. Even if somehow it does get passed, Obama will veto it and there is not a chance Congress can override the veto. I wish they would do something more constuctive with their time, like fixing the tax code or trying to cut waste in government (good luck there; one man’s waste is another man’s re-election.) That is why for a long time Congress is the opposite of progress.
Brian’s Tax Musings
Let’s talk a little about hobby losses. If you have a enterprise you have started that you are not really running with the intent of making a profit, the hobby loss rules kick in. You cannot deduct expenses that are in excess of the income earned. There is a possibility in some cases you might take the excess deductions as a misc itemized deduction, but not always. The IRS considers an enterprise a hobby if you have not made a profit in 3 of the last 5 years including the current year, and 2 out of the last seven years including the current year for breeding, racing, training and showing horses. Here is a link to see the IRS hobby loss criteria:http://www.irs.gov/newsroom/article/0,,id=169490,00.htmlIt is important to remember that you have to have a viable business for the IRS to allow you to deduct losses. This means you have to make money sometimes. We can talk about your business and whether it will meet the IRS requirements to stand as a business.