Especially after the housing crash in the mid-2000s, mortgage lenders are careful when confirming whether potential customers are able to make their house payments. This means that, as a mortgage applicant, you are responsible for proving all income or assets that will be relevant to the process. This is easy in cases such as salary or investment income, but more difficult in cases such as gambling winnings.
Obtain and keep the proper paperwork whenever you cash out your winnings. This will help you prove the income, and it is required under tax law for large windfalls.
Include your gambling winnings whenever your file your tax returns. Once it's on a tax return, your mortgage lender cares less about the source of your income, and more about the amount of your income each year.
Report your gambling winnings on your mortgage application form in the section titled "other income" or "assets." The winnings are more appropriate for "other income" if they come in regular payments over time. A single windfall should be listed under "assets."
Tips
Maintain realistic expectations. Lenders want to know about your reliable, recurring income when determining whether you can afford a loan. Gambling winnings are by nature unreliable, and they don't often turn a lending application in your favor. You may be better served by using your gambling winnings to make a larger down payment, thus reducing the size of the mortgage and making qualification that much easier.
References
- "Personal Finance for Dummies"; Eric Tyson; 2009
- Bankrate: Reporting Gambling Winnings
- Internal Revenue Service. "Instructions for Forms W-2G and 5754 (2020)." Accessed Jan. 19, 2020.
- Internal Revenue Service. "You Won!," Pages 1 & 2. Accessed Feb. 1, 2020.
- Internal Revenue Service. "Gaming Withholding and Reporting Threshold - Forms Needed." Accessed Jan. 19, 2020.
- Internal Revenue Service. "Rev. Proc. 2007-57." Accessed Jan. 19, 2020.
- Internal Revenue Service. "About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship)." Accessed Feb. 1, 2020.
- Internal Revenue Service, Office of Chief Counsel. "Memorandum AM2008-013: Professional Gambler's Wagering Losses and Business Expenses," Pages 8–10. Accessed Jan. 19, 2020.
- Internal Revenue Service. "Topic No. 419 Gambling Income and Losses." Accessed Jan. 19, 2020.
- Internal Revenue Service. "Instructions for Forms W-2G and 5754 (2020)." Accessed Jan. 19, 2020.
- Internal Revenue Service. "Information on the United States-Canada Income Tax Treaty," Page 4. Accessed Jan. 19, 2020.
Tips
- Maintain realistic expectations. Lenders want to know about your reliable, recurring income when determining whether you can afford a loan. Gambling winnings are by nature unreliable, and they don't often turn a lending application in your favor. You may be better served by using your gambling winnings to make a larger down payment, thus reducing the size of the mortgage and making qualification that much easier.
Writer Bio
Jake Wayne has written professionally for more than 12 years, including assignments in business writing, national magazines and book-length projects. He has a psychology degree from the University of Oregon and black belts in three martial arts.