It is useful, therefore, for taxpayers to understand how gambling income and losses are taxed under the Income Tax Act of Canada. Income from Gambling. Are gambling winnings a “prize” under the Income Tax Act? Money received as scholarships and bursaries or “a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer” is taxable (s.56). Gambling income plus your job income (and any other income) equals your total income. Fortunately, you do not necessarily have to pay taxes on all your winnings. Instead, if you itemize your deductions, you can claim your losses up to the amount of your winnings.

All income that you received last year is taxable, and this includes income from hobbies, gambling, tips, etc. This income must be reported on your tax return as other or miscellaneous taxable income.
This page:
• Describes the most common types of miscellaneous income.
• Explains IRS tax form 1099-B.
• Explains how to report your other miscellaneous taxable income.

Get the Biggest Possible Refund:

If you want to avoid costly mistakes, while at the same time taking advantage of all credits and deductions, you'll want to do your taxes with TurboTax this year.
TurboTax helps you work quickly and easily, and it double-checks your return to help you get the largest possible refund. You can even file your state taxes and get your state refund (which may be substantial) much faster than if you mail a paper return.

Reporting your miscellaneous taxable income

Uncommon sources of taxable income are entered together on your tax return under the category of 'miscellaneous income'. Here is a list of possible earnings you may need to report in this section:
• Hobby income
• Gambling winnings
• Prizes
• Awards
• Jury duty fees
• Trusts and estates execution fees
• Barter income
• Election judge's fees
Since there are so many different types of taxable income included under miscellaneous income, there are several forms you may receive in the mail.
However, most of these forms are not required to be sent, so even if you don't receive one, but you know that you've earned taxable income not reported on your W-2, you should still include it on your tax return.
You'll want to be really careful when you report your miscellaneous taxable income. Any mistakes could cost you dearly, should you get audited, especially if you purposefully fail to include any amount on your return.

IRS tax form 1099-B and your hobby or barter income

IRS tax form 1099-B records barter income. It is often difficult to distinguish the difference between barter or hobby income and self-employment income.
For tax purposes, barter income, which is either the exchange of property and services for other property or services or reimbursement for referrals, can be included as other taxable income or as self-employment income. Either way, it is fully taxable.
Income produced by a hobby is considered other taxable income unless it has consistently been profitable over the past few years. After three years of yielding an income, your hobby is considered a business and you are required to report it as self-employment income.
Otherwise, include the gross profit your hobby earned under the 'miscellaneous taxable income' category. Remember, you may deduct the losses or expenses of your hobby as a miscellaneous itemized tax deduction as long as you report hobby income and pay the required taxes. Hobby losses can be claimed as a deduction up to the amount you are claiming as taxable income.

Sidebar
Whether you have to report miscellaneous income as business income, or as simple 'miscellaneous' income, you will find that TurboTax makes the whole process a snap.
And when it comes to deductions losses, the program's reporting and calculator features cannot be beat: it allows you to deduct every last penny, and often alerts you to deductions you might otherwise miss. Start working on your return for free.

Reporting gambling winnings and losses to the IRS

The gross amount of your gambling winnings is fully taxable. All winnings should be included as 'other taxable income' and you should pay taxes on them.
However, some gambling winnings have the tax withheld already. If this is the case, you will receive a W-2G. The amount you have already paid in taxes will be recorded in Box 2 and should be added to the tax withheld from your wages and salaries (Box 2 on your W-2 form) and entered as 'federal income tax withheld'.
Like hobby expenses, gambling losses can be deducted as an itemized deduction, but your deduction for losses cannot exceed your winnings.

Gambling Income Reporting

Other forms and taxable income

Other forms you may receive are:
Form 1099-MISC, which records other taxable income you may receive for duties you perform as a notary public or for commissions
Form 1099-G, which records program earning for qualified state tuition and Alaska Permanent Fund distributions.
Any foreign income you receive should also be reported under 'miscellaneous taxable income'.
Unreported tip information should be included under this income section, if they are more than $20 per month and, Form 4137 needs to be completed. However, if the unreported tips are under $20 per month, include the amount in your wage total, ignore the entry under miscellaneous taxable income and do not complete Form 4137.

Related IRS Publications

You can get more information about miscellaneous earned taxable income directly from the IRS, in the form of Publication 525.

Gambling Income Form

To qualify for an Obamacare tax credit, you have to estimate your household income for the following year in your application. You can base this amount on your most recently filed tax return, taking into account any changes you expect for the following year. When you fill out your application, you must use your “modified adjusted gross income” (MAGI).

For the great majority of self-employed individuals, their MAGI is the same as their adjusted gross income (AGI), which is shown on line 37 of your IRS Form 1040. (If you use the shorter Form 1040EZ, your AGI is on line 4.)

Your MAGI consists of all your income minus certain deductions.

What You Add

To determine your MAGI, first add together all the following amounts:

• wages, salaries, tips
• net income from any self-employment or business (generally the amount of money you take in from your business minus your business expenses)
• taxable interest
• taxable amount of pension, annuity, or IRA distributions
• all Social Security benefits, including disability payments
• tax-exempt interest (for example, from government bonds)
• capital gains
• unemployment compensation
• foreign earned income & housing expenses for Americans living abroad (calculated on IRS Form 2555)
• ordinary dividends
• alimony received
• rental real estate, royalties, partnerships, S corporations, trusts, etc.
• taxable refunds, credits, or offsets of state and local income taxes, and
• other income such as prizes, awards, and gambling winnings.

You need not include: Supplemental Security Income, child support, food stamps, Temporary Assistance for Needy Families (TANF), gifts, workers compensation, Veteran’s disability payments, cash withdrawals from savings, qualified withdrawals from Roth IRAs or proceeds from loans (like student loans, home equity loans, or bank loans).

Best Investments For Monthly Income

What You Subtract

Gambling Income Taxes

To determine your final MAGI amount, subtract the following from your above total:

Tax Free Income Investments

• certain self-employed expenses (deductible part of self-employment taxes; SEP, SIMPLE, and qualified plan contributions; self-employed health insurance deduction)
• student loan interest deduction
• educator expenses
• IRA deduction
• deductible moving expenses
• penalty on early withdrawal of savings
• health savings account deduction
• alimony paid
• domestic production activities deduction, and
• certain business expenses of reservists, performing artists, and fee-basis government officials.

Best Income Investments

When you file your tax return the following year, you have to reconcile the MAGI you actually earned with the amount of credits you received. If you earned more than you listed on your application, you may have to pay all or part of your credit payments back to the federal government. On the other hand, if you earned substantially less, you may be entitled to additional credits.