Question of the Day - 25 September 2023

The reality is that you owe taxes on all income; if you find a nickel on the street and pick it up, you instantly owe Uncle Sam a penny. That said, not 1 in 1,000 gamblers reports his winnings that don't generate a W2-G. So given that loss of their rightful revenue, the IRS isn't about to give you a way to weasel out of reporting a $1200+ jackpot.
For that matter, all comps are taxable at full retail value. So when you get that free toaster ("this week's gift"), you owe taxes on its full retail value. Likewise if you get and redeem a free room offer.
I expect the IRS to slam this loophole closed very soon. If you lose $100 and earn %500 in comps (which I've done), you're liable, technically at least, for taxes on that $400 of income.

I guess we have 0.0% chance of the $1200 limit getting raised anytime in the next few years.  Bump it to $3k or $5k already!  Nope, the government wants that easy money.  

I disagree with the conclusion of an expected closed loophole on this stuff.  It’s an oversimplification of income tax laws to say tax is owed on every single item of value received from any source.  Gross income is not taxable income.  There are hundreds of pages of the IRS code that defines what constitutes gross income, exclusions from gross income, deductions from gross income, credits against income, tax rates at levels of income, and hundreds of other nuances that determine whether you pay taxes on a “free” toaster.  That’s the current state of laws without even considering further regulations to get things squared correctly.  I don’t see this changing anytime soon.  It’s a waste of time and resources.  The cost of forcing everyone (businesses, gamblers, tax professionals, and the IRS) to track every penny of income, expenses, and losses from every transaction would be enormous.  In the end, it would not bring in any net positive revenue.  95%+ gamblers are net losers, anyway.

I got a tax form from my bank for the retail cost of a “free” cooler for opening an account 🙄 

Once money is acquired (wages, inheritance, etc) it is typically taxed. Once it has been taxed it should never be taxed again regardless of whether that money is used for gambling or investing. We don’t have a revenue problem we have a spending problem.

While nothing can avoid the $1,200 or more requirement for a W2-G, it would be kinda crazy to accept free play in lieu anyway -- at least if the normal free play rules of "no cash out; must play through once before cashing" apply.  This would reduce the value of your jackpot by a significant (if playing VP) or enormous (if playing slots) amount.

Of course, the flip side of that is when you hit a jackpot WITH free play, as has happened to me a few times.  That's "sweet revenge" for the net loss trips...

my only advice is never take tax advice on the internet.   

not a jackpot, but in my experience if you win a large promotion, and are given the choice between cash and free play, if you choose cash you will get a 1099, if you choose free play you won't. but i would agree you technically owe taxes either way.

100% Agreed!   Whenever I see the jackpot tax topic come up on various forums, rather than attempt the disprove the typical 90% incorrect "answers", I usually post encouraging them to not use the posted advice from strangers with no expertise on the topic.  "I think this is how it works" is much different than, "this is how it works".

I'm a tax accountant, and whenever a fellow gambler asks for advice, I tell them to give me specific information.  If they give me generalities, I tell them my advice should not be relied upon until I have specifics.

"Based on what little you've told me, pending specific information about your situation, and without doing research to back up what I THINK is how to handle it..."

In keeping with the folks who know that all internet advice is suspect, I will say only that in my limited experience, a smallish inheritance (say, under $250K) is not taxed. (Thanks mom and dad. I spent it already.)

Less than 1/2 the people who won a car on the "Price is Right" ever ended up with the car. They owed tax on the MSRP of the car and usually took the cash equivalent. Apparently the small print says that "cash equivalency will be 50% of the prize value less applicable tax". So that 10K trip to Hawaii becomes 5k cash less 25% withholding, AKA $10k becomes $3750 faster than you can blink.

@David In Canada lottery and gambling is not taxed, you play with after tax money and you win after tax money. Come to Canada, No Trump.

@John In the US the way to get around the inheritance tax is to get the money before they die. Each year your parents can give you approximately $15k (used to be $14k now $17k) not taxed. You get your parents to write an IOU for the full amount and have it notarized each year. When they pass you cash the IOUs against the estate. Assuming they leave you the money vs the family cat.

Re: your “move to Canada” advice:
I have a friend who has been trying to emigrate to Canada for years. Unfortunately, she is over 60, so they won’t let her. Don’t want “old folks” sucking their healthcare system dry. 
If I’m not mistaken, they would have taken her if she were a professional in an area where help is needed. Sadly, she was a newspaper reporter (a very good one). Who needs them anymore. 😏

They have a scoring system - x number of points for speaking english, y if you speak french, x+y if you speak both, more points for university or college education, there is also a list of jobs that are under-employed so they give extra points for that. Apparently Nurse, Doctor and Exotic Dancer were all on that list. 
Point of Trivia: Sarnia Ontario once had the distinction of having the most strip clubs per capita in all of Canada. They are on a major trucking route just across the US border from Michigan (the BlueWater bridge). I think the influx of Ukrainian's may have closed that last gap. 

When my wife immigrated to Canada from Brazil she came over on an Enterpernial visa. Where whe made a 250k investment and hired at least 3 Canadians. They were teaching SAP (high end accounting software) Once in on a visa they applied for a PR card (Canadian equivalent of a green card). Pretty much when you in ona valid visa the path to PR is a given.

Raymond, here is an option for when "a fellow gambler" (or anyone) asks you for tax advice.  Years ago a barber had this sign at his station:

"I have to charge my friends for my services, since I do not have enough enemies from whom to make a living."

LOL.

Candy

From NerdWallet: "There is no federal inheritance tax, but there is a federal estate tax. The federal estate tax generally applies to assets over $12.92 million in 2023, and the estate tax rate ranges from 18% to 40%. Some states also have estate taxes, and they might have much lower exemption thresholds than the IRS." Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania have an inheritance tax; Iowa currently does but is phasing it out. 13 states have an ESTATE tax, which is different. But it doesn't end there. I live in California; my half-brother died in October in Oakland County, Michigan; I just learned this year that that county imposes an inheritance FEE on the value of his estate as of the date of his death. I have no idea how many other counties around the country do the same. So it's advisable to not only have a financial advisor, but also consult with a LOCAL probate attorney, as well as maybe a local tax attorney.