Question

Luther went to Las Vegas for his 30th birthday and went straight to the casinos. Luther got lucky and earned gambling winnings of $14,000. However, he did loose $16,750. How are Luther’s gambling winnings reported and how much of his losses can Luther deduct on Schedule A? (2 pts)

Answer 1

Luther has to report his gambling winnings on his Form 1040 as Other Income (line 21). These even include winnings that aren't reported on Form W-2G (which the casino is required to issue for certain gambling winnings or those that are subject to federal income tax withholding).

Luther can deduct his gambling losses only if he itemizes his deductions on Form 1040, Schedule A. The maximum he can deduct is $ 14,000, being the amount of gambling income reported on his return. He can claim this as Other Miscellaneous Deductions (line 28).