Is gambling income subject to taxation?

[Michael Wechsler]

If somebody won almost 22Gs on football, do they got to pay a income tax on that? Thanks.

If you are talking about illegal gambling the question would seem a little strange, wouldn't you say? My understanding is that you do pay taxes for gambling winnings. Whether at Atlantic City or Vegas, it's still "gross income!" Section 61 of the IRS code is a pretty famous section which is kind of a catch-all for income which you will pay taxes upon.

Section 61(a) gives a general definition for gross income -- "Except as otherwise provided in this subtitle, gross income means all income from whatever source derived." There are specific definitions but the "all income from whatever source derived" part is designed to try to be a net to try to catch the income from all sources.

 

[rbrown100]

All gambling winnings, in theory at least, must be included in gross income on line 21 of Form 1040. The fact that information returns go to the IRS if a payout is big enough and the odds were high enough can make it inadvisable to ignore this rule. Now, gambling losses are only deductible on Schedule A, line 27 ( and only to the extent of winnings). So if you don't itemize, this rule can hurt you. Also, if the gambling was illegal, the 5th Amendment doesn't protect you from having to report them.