IRS Rules for Raffle Tickets As Gambling Losses
Taxable income consists of "income from whatever source derived," according to Title 26, Section 61 of the Internal Revenue Code. This broad definition includes income that is gained from gambling activities. The purchase of raffle tickets is generally considered to be a gambling activity since the participant is required to pay money with no guarantee of receiving a good or a service. The Internal Revenue Service allows for deductions of gambling losses, including losses from raffle ticket purchases, if the taxpayer meets certain criteria.
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Reporting Raffle Winnings and Losses
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Any taxpayer who participates in gambling activities, such as a raffle, and is successful in winning a prize or a cash payout must report the amount or value of the award as income earned to him on Form 1040. Taxpayers can offset their winning by deducting the amount of gambling losses or the amounts that they spent on losing raffle tickets up to the amount of their winnings. For example, if you won $1,000 in the past year through any gambling activity, you would be able to deduct up to $1,000 in money paid for losing raffle tickets and other gambling losses.
Form W2-G
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Form W2-G is the form that payers of games and raffles must provide to the winners of a gambling activities once their earnings reach a certain level. The specific reporting threshold for issuing the W2-G form may vary from year to year. Updated reporting requirements can be obtained by contacting the Internal Revenue Service. This form is similar to the W-2 form that you receive from your employer at the end of the year. This form will help you to determine the total amount of raffle and other gambling losses you are eligible to deduct. However, gamblers should keep in mind that they are required to report any prize amounts won from gambling and raffle activities regardless of whether the payer is required to issue a W2-G statement.
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Itemization Requirement
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Taxpayers who wish to deduct raffle and gambling activity losses are required to itemize their deductions rather than take the annual standard deduction. Itemized deductions are a listing of all of the tax deductible items that you acquired throughout the year. Itemizing your deductions is only advantageous if the amount of your itemized deductions is greater than the standard deduction. Taxpayers can contact the IRS or their personal accountant for more information on the current standard deduction.
Evidence of Losses
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Taxpayers who wish to deduct raffle losses must be able to provide evidence of the amounts paid and lost. Appropriate evidence may be in the form of receipts, tickets or a detailed personal record of your gambling losses and wins. The inability to provide proof of your losses may cause you to become ineligible for a raffle loss deduction.
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