Today TaxMama hears from Brain, in the Tax Parlor, who tells us. “Recently I won $4,000 in a state lottery. I spent about $500 for the purchase of a batch of lottery tickets all at once. I was wondering if I could subtract the cost from the proceeds I won?”
I’ll bet that’s not the only time you bought tickets this year.
Yes, you may be able to deduct the costs of those tickets – and all the other tickets you bought in the year of your win. Only, you can’t net the winnings and losses.
You report the income on page 1of your Form 1040 (long form). Then, you will have to itemize – use Schedule A. http://www.irs.gov/pub/irs-pdf/f1040sab.pdf
You’ll report your gambling losses (or investments) on a special line – Line 27 – Other Miscellaneous Deductions. This will allow you to deduct the full amount of your gambling costs.
OK, that’s the good news.
The bad news is, if don’t normally itemize, you probably still won’t be able to. Or if you do, you’ll replace your standard deduction with these itemized deductions – and you’ll only get the benefit of a few extra dollars of deduction.
Yes, it’s a rip-off. It’s only meaningful if you have really big wins, with big losses to go along with them. Hey, enjoy the money!
And remember, you’ll find answers to lots of questions about winnings and other tax information, free. Where? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips. Please click on the subscribe link and join us.]
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- IRS Schedule A :: Itemized Deductions