Paying Tax on a Cruise Ship & Gambling
Setting sail on a cruise ship for vacation can be incredibly exciting, especially if Lady Luck is on your side in the ship's casino. One thing to keep in mind when sitting at a blackjack table or pumping quarters into a slot machine is that you must report all of your gambling winnings on your tax return. But remember: Leaving the casino with more than you walked in with is always better than losing, regardless of your tax bill.
Other People Are Reading
-
Taxable Gambling Winnings
-
The federal tax law regarding your gambling winnings from a cruise ship casino is straightforward and without exception. The IRS requires you to report all of your gambling winnings as taxable income in the year you win it. However, contrary to what taxpayers may believe, you can't net your gambling winnings with your losses. You must report your gross gambling winnings in one section of your tax return and your deductible losses in another.
Deducting Gambling Losses
-
Before you walk onto the casino floor, be aware that although deductions are available for your gambling losses, the IRS only allows them to the extent you report gambling winnings on the same tax return. For example, if you lose $100 one evening playing slot machines on the ship, the government doesn't subsidize your losses with a tax deduction. However, if you win $100 the next evening, you may deduct your entire loss as it doesn't exceed your taxable winnings. if you lose $150 the second night, however, the excess $50 is nondeductible.
-
Maintaining a Gambling Diary
-
Because it's extremely difficult for the IRS to verify each wager you make while on a cruise ship, the agency requires you to keep a diary. At a minimum, the diary must include the dates of your cruise, the name of the ship, the location of the casino if the vessel features more than one, the date and type of your wagering activity each day, and the names of people who accompany you to the casino, if any. Most importantly, you must keep track of each win and loss rather than just your net winnings or losses each day.
How to Report
-
When you fill out your next tax return, you must report all gambling winnings on the "Other Income" line of your tax form. However, the only way you may claim a deduction for the gambling losses you incur on the cruise is if you elect to itemize your deductions on Schedule A. Your only option is to report those losses in the miscellaneous expenses that aren't subject to the 2 percent adjusted gross income floor. If you choose to claim the standard deduction instead, the IRS doesn't allow you to claim any of your gambling losses, which requires you to pay income tax on your gross gambling winnings.
-
