TAX TIP OF THE DAY... get ready for your next Lotto jackpot!
Gambling winnings are taxable income. However, you can deduct gambling losses to the extent of the winnings. Regular players should save losing tickets for the entire year... JUST IN CASE that big win comes your way. If you use a players card, casinos will automatically track slots wins/losses for you and you can request a year-end report. Regular table game players are advised to keep a daily win/loss log to document losses along with atm withdrawal receipts FROM THE CASINO LOCATION.
That $1 million dollar win will cost you approximately 43% or $430k in taxes. And if you give away more than $14k to any one individual, additional gift tax (paid by the giver) may apply as well.
Scenario... You win $1 million. They reduce it to $600k in order to pay you a lump sum up front. After taxes you have $342k left. You give 10% to charity leaving you with $308k. Most winners buy a fancy new car... let's say for $50k leaving you with $258k. Next you are expected to pay off your mortgage of $100k leaving you with $158k. This might be enough to send 1 kid to college... or take 100 of your friends on a Caribbean cruise to celebrate spending the last dime of your lottery winnings!
So as you can see, you need to win more than $1 million.
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If you need any help... www.baboiancpa.com