The client engaged in an online gambling game in the latter part of 2023. She won $150,000 and received the funds in 2024. The expenses related to this activity were paid in 2023. The client is not a professional gambler. My understanding is the income will be reported on the income tax return for the tax year 2024. Since the expenses were paid in 2023, they cannot be deducted in 2024? The estimated Federal and State income taxes on the total winnings in 2024 must all be paid by the April 15, 2024 and not spread out across 2024, correct? The client works for an employer as a W-2 employee.
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Not a Professional gambler = No expense deduction
Pay the E/S in the quarter its earned.
Chris -
As long as withholding in 2024 will be at least 110% of 2023 liability, no need to make estimated payments if the goal is to not have penalty.
TP may want to max out 401K for 2024.Comment
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By "expenses", do you mean gambling losses? Losses up to the amount of gambling winnings.are deductible on Schedule A. Per instructions, gambling losses include expenses incurred in connection with the conduct of the gambling activity, such as travel to and from a casino. Contrary to comment #2, I believe being a professional gambler is what allows you to deduct losses in excess of winnings, if any, not simply deducting expenses up to the amount of winnings. (For tax years 2018 through 2025, professional gambling losses and expenses are limited to the amount of your winnings.)
In other words, is it that she lost money gambling in 2023, and then in the first few days, of the new year, she had a big win? If so, yes that is tough luck for tax purposes (but still good luck overall). Is there any way that there was constructive receipt of the funds in 2023 (I don't know how online gambling works). Or maybe she'll have more losses in the current year.Last edited by Rapid Robert; 01-09-2024, 10:17 AM."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
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Most likely if it was won in 2023, she will receive a form for 2023.
She will need a win/loss report to be able to deduct losses. Any other expenses will be non deductible as not a professional gambler.
ChrisComment
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