vpFREE2 Forums

Taxes on Gambling

#1

<Even if the player switches to a long form>
<to offset the win with itemized Sched. A gambling>
losses they end up absorbing taxes on the difference>
<between their other deductions and the standard>
<deduction.>

<- Harry>

Considering that gambling losses increase your
itemized deductions it may allow you to deduct some
other things like health realated expense, taxes,
possibly interest, donations, etc. that you wouldn't
qualify to deduct because they don't exceed the
standard deduction. In this case you would save some
tax. Correct?

I might be missing something and for this discussion
I'm only thinking of your example where a taxpayer is
generally able to use the short form. Yes the extra
income reported if enough may cause you to lose some
of your itemized deductions and possibly a part of
your exemptions. But if the extra deductions you pick
up more than offset the loss of a part of your total
deductions then it looks as if you would still gain.
I'm only trying to make the point here that it could
be advantageous to some taxpayers to file the long
form.

Danny Perry

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#2

Danny Perry wrote:

Considering that gambling losses increase your
itemized deductions it may allow you to deduct some
other things like health realated expense, taxes,
possibly interest, donations, etc. that you wouldn't
qualify to deduct because they don't exceed the
standard deduction. In this case you would save some
tax. Correct?

No.

As far as taking "other deductions" goes, the issue isn't that the
short form filer is prevented from deducting these expenses. A
non-itemizer is simply allowed a default "standard deduction" -- $4750
for a single filer in 2003, e.g. (Ditto for a long form filer who
takes a standard deduction rather than itemize.)

If you choose not to itemize it's most likely because the total of
qualified deductions doesn't exceed the standard amount and you're
better off taking the standard deduction.

A single filer who incurs sufficient deductible gambling losses so
that their total deductions are more than $4750 now finds it
advantageous to itemize. However, they don't draw any further
advantage from their non-gambling related deductions than when they
took a standard deduciton.

It's merely the case they now can take a larger deduction when they
itemize. In itemizing, their other deductions don't benefit them any
more than when taking a standard deduction. The additional benefit
from itemizing strictly arises from the gambling losses.

A brief example: A single filer has aggregate deductible expenses of
$3000 before any gambling losses are concerned. Without gambling
losses, they're better off taking a standard deduction. If they have
$2500 of deductible gambling losses on top of that, they're total
deductions are now $5500 and it's to their advantage to itemize.

However, the benefit from itemizing is restricted to just the $750 of
their gambling losses that took them over the standard deduction
amount. Their is no impact on the balance of any of the other
deductions that made up the original $3000.

- Harry

#3

It likely goes without saying but I wanted to just note what's been
said before:

If you take a deduction for gambling losses on your 1040 Sched. A, it
can be no larger than reported gambling wins listed as income on the
face of your 1040.

I just wanted to make sure I didn't give the impression that gambling
activity will EVER reduce the taxes of the typical filer :wink:

- Harry