(This article was originally published in the Baltimore Business Journal on March 20, 2015)
Sidestepping the legalities of NCAA office pools, gambling winnings constitute taxable income. Gambling income includes, but is not limited to, cash or property won in lotteries, raffles, horse and dog races, casinos and your friendly office pool. There is no threshold amount that triggers the reporting requirements. Even if a Form W2-G is not issued, all gambling income must be reported on the recipient’s tax return.
On a bright note, you may offset your gambling winnings with your gambling losses by claiming the losses as an itemized deduction. Therefore losses from the office football pool, a weekend in Atlantic City or the cost of unsuccessful scratch-off tickets will reduce the tax associated with gambling winnings. However, you cannot deduct gambling losses that exceed your annual winnings.
Unfortunately, returns with gambling losses up to the amount of winnings have been known to be selected for IRS audits. As with any tax deduction, record keeping and proper substantiation is paramount. So, in the event you deduct such losses, be prepared to show proof of your losses when the tax man cometh.