| We all know that we must pay both income and | | | | you can prove that your gambling activity was |
| social security taxes on employment income as | | | | conducted as a trade or business your losses |
| well as any contract labor. In general, most | | | | would be reported, but be careful here your |
| income you receive is going to be taxable. | | | | gambling losses are still limited to the extent of |
| However, there are some situations where it is | | | | your gambling gains. You should be very careful |
| only partially taxable and some that are not | | | | when completing your return as a professional |
| taxable at all. Some income that is not taxable | | | | gambler as the courts have a hard time |
| includes: child support payments, gifts, bequests | | | | envisioning gambling as not being pure recreation. |
| and inheritances; workers' compensation benefits; | | | | |
| welfare benefits; and cash rebates from a dealer. | | | | This is one of the main reasons people might |
| In this article I will discuss some of the specifics | | | | choose to take annual payments, when they're an |
| for certain items that seem to come up more | | | | option, rather than a lump-sum payout. Along with |
| frequently than others. | | | | lottery and other gambling winnings, you will have |
| | | | | to pay taxes on any prizes you received, |
| You win cash from a drawing or contest it is | | | | regardless of whether they were given in the |
| considered taxable income and must be reported | | | | form of cash. If your church or child's school sold |
| on your return as other income. Similarly if | | | | raffle tickets, and you win a car, you have to pay |
| you win something that is not cash, like a TV or | | | | taxes on the cash value of that car. |
| car, boat, a trip, etc. Then the fair market value | | | | |
| of your winnings needs to be reported on your | | | | If you received a gift from a friend, relative or |
| return as other income. | | | | perfect stranger, you do not have to pay taxes |
| | | | | on it. When someone gives you a gift of cash it |
| If you happen to hit the jackpot in Vegas or win | | | | is not taxable. Similarly when someone gives you |
| the lottery, you will owe the IRS a nice chunk | | | | a non-cash gift, it is not taxable to you. The sale |
| of change as win money while gambling that | | | | of a gift may produce a capital gain, which would |
| income is taxable as other income. This includes | | | | be taxable. However, be aware that any money |
| raffles and lottery. You are allowed to deduct | | | | exchanged between an employer and employee is |
| those losses up to the amount of your winnings, | | | | considered compensation and therefore taxable |
| as a miscellaneous itemized deduction. Similarly | | | | income. |