End of Year Tax Tip

Now that we're in the home stretch of the calendar year, many financial columns give last-minute, end-of-the-year tax tips to minimize your taxes. So I want to take this opportunity to give you a tip to minimize your taxes if you received a W-2G sometime during the year.

The usual disclaimer: The rules for dealing with gambling winnings are not clear cut and I'm not a tax specialist. You should consult with a paid preparer to make sure your return is filled in properly.

You have to claim the amounts on your W-2Gs as other income. With other ventures that may provide you with other income (such as trading stocks or owning a business), you claim your net income from the venture. But gambling winnings are treated more like a winfall with no expenses associated with them. You are allowed to deduct gambling losses, but you have to do so as an itemized deduction.

So, here we are in the middle of December and you have a W-2G and you want to minimize the taxes you'll have to pay on your jackpot. If you've been keeping track of your wins and losses like I recommend, you're ahead of the game.

But what do you do if you haven't been keeping track? If you are planning to visit a casino between now and the end of the year, keep track of your wins and losses when you go. If you have a loss, you can then use that loss to reduce the taxes you'll have to pay on your winnings.

Now, you may ask why you should bother keeping these records when you can just ask the slot club for a win/loss statement? First, you will request win/loss statements from your slot clubs when you do your taxes. Your records will corroborate those statements. Second, slot clubs sometimes make mistakes and you have your own evidence for a loss. Finally, from what I've heard, the IRS prefers your own contemporaneous log.

What should you keep in your log? Your record for a session should contain at a minimum the date, the casino, a description of the machine or machines you played, the amount you started with, and the amount you ended with.

One final word: I'm not suggesting that you go out and play in order to lose money so you can pay less in taxes. But if you were planning to visit a casino anyway, you might as well take advantage of mechanism available to you to lower your taxes.