Casual games of chance like Bingo are common pastimes, but they can also result in significant prizes of cash and property. If you are lucky enough to win at bingo, resist the temptation to go on a shopping spree. The money and prizes you win at Bingo are subject to income tax, so you can't actually spend the full amount of your winnings.
Basics of Gambling Winnings
The Internal Revenue Service considers all gambling winnings taxable income. This includes bingo, keno and raffles as well as gambling at casinos, horse and dog racetracks, lotteries and scratch-off tickets. The IRS says that if you have gambling winnings, you must report them on line 21 of IRS Form 1040. Form 1040 is the main tax form you fill out when you file your income tax return.
Withholding on Gambling Winnings
When you earn money at a job, your employer holds back a portion of your pay and sends it to the government to cover the income tax that you owe. The IRS says that payers of gambling winnings may provide you with Form W-2G and withhold money from winnings on your behalf, but small bingo winnings are generally not subject to tax withholding if you provide the payer with your social security number. On the other hand, the IRS states that winnings of $1,200 or more from bingo are subject to tax withholding at a rate of 28 percent.
Winning Property and Prizes
Sometimes bingo games offer up prizes like vacation packages or property instead of cash. Prizes are taxable up to the fair market value of the prize. Fair market value is the amount that the property would sell for on the open market. For example, if you win a vacation for two that would cost $2,500, you have to pay income taxes as if you had won $2,500 in cash.
Deducting Gambling Losses
As strange as it may sound, the IRS lets you take a tax deduction on gambling losses. For example, if you win $1,000 playing bingo and spend $500 on tickets, you can deduct the $500 cost as a gambling loss. The catch is that that losses are only deductible up to the amount of gambling winnings. This means that if you spend $500 on tickets but don't win anything, you can't take a tax deduction.