Tax Laws Regarding Money Won Playing Bingo

Tax Laws Regarding Money Won Playing Bingo
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Whether you play bingo because you enjoy the game or for the social aspects, your taxes are probably the farthest thing from your mind when you're playing. While you might see your weekly bingo game as a fun, social event, the Internal Revenue Service might see your winnings differently.

Ordinary Income

Your bingo winnings count as gambling income when it comes time to file your income taxes. The income gets listed as miscellaneous income on Form 1040, which means it gets included when figuring your taxable income, but it doesn't get hit with self-employment taxes. If you make more than $1,200 from bingo in one sitting, you should receive a Form W-2G reporting your winnings to the IRS. However, even if you don't receive a form, you still need to include the winnings.

Prizes, Too

Sometimes, bingo games give winners prizes rather than cash, especially as a reward for winning the most games over the course of a season. If you’ve won prizes playing bingo, you need to include the fair market value of whatever you’ve won as taxable income. For example, say you win the grand prize cruise in your bingo league and it’s worth $2,500. Even though you haven’t received any cash, you still must report $2,500 in gambling winnings on your taxes.

Tax Withholding

If you make less than $5,000 at a time from bingo, you won't have any money withheld from your winnings. But, if you do hit a bigger jackpot, the payer has to withhold 25 percent from your winnings. That amount gets reported on your Form W-2G and is money that you don't have to pay when you file your return. If you don't have any withheld, but you have substantial winnings for the year, you could find a big bill when you file your return.

Offsetting Losses

Unless you’re the luckiest person alive, you’ve got some losses as well as winnings. The bad news is that you can’t simply report your net winnings for the year as your taxable income. Instead, you deduct your gambling losses as an itemized deduction, so if you’re not itemizing, it won’t do you any good. Plus, you can’t deduct more than you won during the year. For example, if you won $500 playing bingo, you can’t deduct more than $500 in losses.