Question

Would you say that winnings from gambling should be taxed as do regular trading income?

Justify your answers

Answer 1

As per the United States Internal Revenue Code, ordinary income consistes of income from salaries, wages, etc from employment, investment income from interest, dividend, etc and gambling winnings. They are treated as an ordinary income, so they should be taxed as the regular tradng incomes are taxed.

Any money won from the gamblin activities is considered as taxable income. If the item is received from gambling activities, then the fair market value will be treated as gambling income. Gambling winnings includes, but are not limited to, money/prize earned from Casinos, Poker, Lotteries, Horse races, Bingo and many more.

Such winnings are generally subject to 25% tax. However there are a few exceptions to it such as winnings over $5,000 from below sources are subject to income tax withholding:

1. Sweepstakes, eagering pool (poker winnings) or lottery

2. Any other wager if winnings are at least 300 times the amount of bet.

In case of non-monetory incomes, tax will be paid by winner on the fair market value.

Gambling losses can be deducted like regular losses if the deductions are itemised. Deduction can be claimed upto a certain amount of your total gambling winnings. It is mandatory as per IRS to keep the detailed records of gambling wins and losses and keep all documnetation including receipts, tickets, etc. same as the scenario for regular incomes and losses.

Winning from gambling (like regular incomes) must be reported on tax returns as well.