Social security refers to the program which uses public funds to ensure a degree of economic security for the people. In the United States, it was established in 1935 which takes care of disability, old age, income for the elderly amongst others.

The taxes used to run the social security program is from both employers and employees. These taxes are not used primarily for the welfare of these employees and employers but for people who have attained retirement age or people who are eligible to benefit from the program. It is a cycle. People who can work how pay taxes for those who have worked before them and when the workers of how retire, those who are working then get to pay their own social security.

Thus, from my reading of the EITC statute, gambling winnings of professional gamblers IS considered “earned income,” but gambling winnings of recreational gamblers IS NOT considered “earned income.” The credit amount is determined by a formula. Some states do require gambling winners to claim the gambling winnings in the state where they were won. Most states tax all income earned in their state, regardless of your residency.

Gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips. Tax and Your Gambling Winnings Firstly, it’s key to understand that winnings from gambling are not taxed. Regardless of how much they are, either from winnings from a scratch card to having all the numbers in a lottery, the size of your win will always be the same amount that your bank balance sees. The total gambling winnings are included in the adjusted gross income (AGI) for the year, and while the losses are deducted as an itemized deduction and limited to an amount not exceeding the reported winnings for the year.

The program covers retirement pensions, disability insurance, survivor benefits, unemployment insurance. This means not everyone is entitled to social security benefits. The group of people who are entitled to it are between ages 65 and 67 all depends on the year you were born, you could be eligible at age 62 but applying at this age would reduce your social security benefits permanently, spouses. These are not the only requirements to qualify you for social security there are other important determinants for your eligibility. The number of years you worked is important too. You are assigned a number of credits for every year worked. For every $1360 earned, you are assigned one credit. What this means is depending on when you born, you would or would not be eligible for social security benefits.

For disability benefits, you might be discontinued from receiving it is you come into some money from say, the lottery, gambling etc. The receipt of this form of income does not necessarily have to be you directly, it could be your spouse. If the amount you win is more than $2000, sorry, but you do not qualify for social security benefits that month. If the amount is less, your social security benefits will be matched dollar to dollar with the amount. Whatever is left, you will be paid.

A great impact is felt on your tax returns when you win gambling than when you lose. The amount which you win gambling might seem small but the impact on your tax return are substantial. The tax which you have to pay would most likely override the amount won even your gambling losses on say, fruityslots.com,would not cover it.

You are required by law to report your gambling winnings. This is also done by the casino. Once a player exceeds the $1,200 mark on say, slots, a report is filed. Check your tax report and any amount won from gambling is on the first page.

The reporting of your gambling winnings actually cover all amounts won but in the event that the amount won exceeds the amounts listed below, they should be reported on your Form W-2G.

.$5,000 or more won in poker tournaments.

.$1,500 or more won in keno

.$1,200 or more won at slots or bingo

.$600 or more won at betting if the number of bets 300 or more. These amounts might be reduced when the wager placed by the winner is considered. It is required by law and the regulatory authorities that all amounts won gambling should be reported on your tax returns.

Gambling losses also have an impact on social security. The can be used to claim tax returns, but this applies only to when it is equal to the total amount of gambling winnings reported. They are claimed under itemized deduction. Remember that you can only successfully claim losses if all your gambling receipts and records are complete and in order. As this will be the evidence needed to make the ‘itemized deductions’. So, technicality your gambling losses are reclaimed through your gambling winnings but only to the extend that the amounts are the same.

According to the IRS, gambling winnings are taxable income. They only make provision for the deduction of losses. Gambling activities whose winnings will be taxed are games like poker, slots, bingo, racetrack games amongst others. Gambling winnings on a whole affect your social security hugely because whether you lose the same amount of money you win while gambling you would be paying a lot in taxes. When you win from gambling, the amount won is subjected to a 25% tax. There are certain higher amounts however which an income tax will be applied.

Most people especially retirees play the lottery. So they are concerned if this would affect their social security benefits. Well, the good news is that, your social security benefits is not affected by winning the lottery. This is because there is a social security earnings test conducted on your earnings. This worked this way. For every $2 earned, social security withholds $1 for amounts $17,640 and above as at 2019. This is applicable for workers who are not up to the full retirement age. Still, this bracket of people are concerned about the possibility of losing their benefits if they win the lottery. Good news, your benefits are safe. The lottery winnings would be taxed as required by law, but your benefits would be intact.

Gambling is fun. The possibilities for winnings are endless. You could actually win the jackpot and smile to the bank. The other arm to gambling is losing and to be honest, most people loss kore than they gain. For you as an individual who is on social security, the impact on your benefits is felt more than an individual who isn’t on social security. The soft landing you would have is the ability to report your losses when you report your winnings then the amount of losses would be deducted. This deduction isn’t carried out arbitrarily. Say, you lost $500 and won $600. The amount of losses deducted from your tax return would be $500. So, make sure you have all necessary information about your social security before you gamble.

Although Maryland House Bill No. 989 failed to pass and legalize in-state sports betting in 2018, industry experts believe betting on sports will become legal in our state sooner rather than later, and it could have a major impact on Maryland’s economy.

In fact, with the flurry of legislative activity surrounding legalized sports betting in the United States over the past year, it seems the question isn’t if Maryland will someday have legal sports gambling, but rather when. But what would legalization mean in terms of taxes for the lucky winners (or unlucky losers)?

Keep reading to learn more about state-sanctioned sports gambling and find out how it could affect Maryland residents and their taxes.

Supreme Court Overturns Professional and Amateur Sports Protection Act and Paves the Way for Legalized Sports Betting

In May of 2018, the Supreme Court overturned the Professional and Amateur Sports Protection Act (signed into law in 1992) by a 6-3 vote, which means states can now choose to legalize sports betting on a state-by-state basis.

Within weeks, Delaware and New Jersey casinos were up and running with their own sports betting programs, and Pennsylvania quickly followed. However, Maryland failed to pass its own legislation (House Bill No. 989) in 2018, which means state legislators are now looking forward to 2020 as their next chance to legalize sports gambling in our state.

While Maryland residents can’t yet gamble on sports legally at home, many individuals are willing to make the relatively short drive north to Pennsylvania or south to West Virginia to place their wagers on professional and college sports games, and Las Vegas remains a popular vacation spot. So, many of our clients at S.H. Block are already contacting our offices to ask us how to report their sports gambling winnings when they file their taxes.

How Does Maryland Tax Proceeds From Sports Betting?

In case you had any doubt: yes, the government charges income tax on all gambling winnings, including those from sports gambling. So, if you’re planning on laying down a big bet for this year’s Super Bowl or going all out for March Madness, you’ll want to understand how the tax process for reporting gambling winnings works to avoid getting yourself in hot water come tax time.

Whenever someone wins at least 300 bets or at least $600 in proceeds betting on sports, the gambling facility is required to report those winnings to the IRS, which then considers the winnings income. In addition, the IRS requires the facility to withhold 24% of any winnings as federal withholding tax. When tax season rolls around, winners will receive a Form W-2G. This form lists the total amount of winnings and states how much was withheld for tax purposes.

Even if you don’t receive one of these forms, you’re still required to report every cent of your gambling winnings, whether from sports betting or any other type of gambling. So, be sure to file honestly to avoid fines, penalties, an audit, or even criminal charges. Depending on the nature and extent of an inaccurate or fraudulent tax return, you could face as much as $250,000 in fines and a maximum three-year jail sentence in addition to any back taxes owed.

Does Gambling Winnings Affect Tax Credits Filing

Winners can itemize their losses as miscellaneous deductions on their annual tax return, but the deduction amount can’t exceed your total winnings. In other words, if you win $4,000 betting on sports but then lose $7,000, you can only deduct the $7,000 loss from the $4,000 total winnings, which will let you claim total gambling winnings of $0. You can’t deduct the remainder of your gambling losses from any other income.

Be sure to keep meticulous records of your losses, hold on to all your betting tickets, and file a Form 5754 to officially declare your gambling winnings and losses for tax purposes.

S.H. Block Tax Services Is Here to Help With All Your Tax Needs

Does Gambling Winnings Affect Tax Credits Sdat

Whether you want to protect your legal gambling winnings, resolve a tax debt with the IRS through an Offer in Compromise, or navigate a State of Maryland audit of your small business, S.H. Block Tax Services is here to help.

Our attorneys and support staff have decades of legal experience, and we’ve earned an A+ rating with the Better Business Bureau. Please reach out today to schedule your free consultation so we can discuss your current situation and go over your options. To contact us, just call (410) 793-1231 or complete this brief online contact form.

References

Barker, J., & Dresser, M. (2018, May 14). Supreme Court clears way for sports betting, and Maryland casinos want in. The Baltimore Sun. Retrieved from https://www.baltimoresun.com/business/bs-md-sports-betting-maryland-20180514-story.html

States That Tax Gambling Winnings

Melser, L. (2018, July 23). Maryland trails neighboring states in sports betting after SCOTUS ruling. WBAL TV. Retrieved from https://www.wbaltv.com/article/maryland-trails-neighboring-states-in-sports-betting-after-scotus-ruling/22519611

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