Are Gambling Winnings Considered Earned Income For Social Security
For example, Social Security benefits, unemployment benefits, alimony, child support and gambling winnings are not earned and do not arise from making investments. Retirement income, such as money you withdraw from a 401(k) or IRA is generally not considered investment income for tax purposes, even though you can use the funds in a retirement. Social Security Handbook 1812. The following types of earnings income (or losses) do not count as earnings from employment or self-employment under the earnings test. The winnings are included in your Adjusted Gross Income. Let’s say, you give the goods you won to charity. You deduct the contribution as an itemized deduction, your gross income will include the entire winnings. How Does Gambling Affect My Medicare Premium?
- Are Gambling Winnings Considered Earned Income For Social Security Recipients
- Are Gambling Winnings Considered Earned Income For Social Security Income
Everyone likes to gamble, play the lottery or Bingo every once in a while. Even a recreational gambler, will come across that quirk in the tax law. What quirk you wonder? That glitch that can actually cause you to pay more for your health insurance if you have gambling winnings. Yes, even if the overall result from gambling for the year is actually a loss. How on earth can this be, you wonder?
Obamacare and the Tax Laws About Gambling
Well, you know how tangled a web our tax laws are. You should note that adding Obamacare into the equation creates some interesting fallout, such as this oddity.
To understand how this happens, you have to understand how gambling winnings and losses are put on your tax return. Gambling proceeds and losses are generally not a net item on the tax return. Therefore, the total gambling winnings are part of your AGI for the year. Your losses are taken as an itemized deduction and limited to an amount not to exceed your reported winnings.
Reporting Gambling Winnings
So, whether or not you itemize your deductions and deduct your gambling losses, the full amount of the gambling winnings is part of AGI. And, your AGI is included in your household income, which is used to determine the amount of premium tax credit (PTC) to which you are entitled. PTC is the subsidy the government provides to help pay for your insurance when you purchase it through the government insurance Marketplace. The higher your income, the lower your Premium Tax Credit, and the lower the PTC, the higher your insurance premiums.
How You Gamble Matters Too!
Did your gambling winnings exceed certain thresholds based on the type of gambling you did and the amount you won? Did you win or lose at the casino, poker palace or racetrack? Well, that establishment is required to send you and the IRS a Form W-2G that shows the winnings. You can be sure the IRS will be aware of your gambling income. Even if your losses for the year exceed your winnings, or should you not receive a W-2G form, the IRS expects you to report your winnings. The burden is yours to report it. This will increase your AGI and, likely, your Marketplace-purchased insurance premiums also.
What if I win money on a Game Show?
The same requirement applies if you win on a game show. The winnings are included in your Adjusted Gross Income. Let’s say, you give the goods you won to charity. You deduct the contribution as an itemized deduction, your gross income will include the entire winnings.
How Does Gambling Affect My Medicare Premium?
This impacts very few individuals. However, those who are retired and on Medicare, are in the same boat. That being gambling can increase the cost of Medicare Part B and D premiums. An individual’s Medicare B and D premiums are based on the person’s AGI from two years prior. Thus, if you hit it big a couple of years back, you could see a rise in two of your monthly Medicare B premiums. Those being the Medicare B and a supplement for the Medicare D premiums (prescription drug coverage).
What If I Have a Low Income? Does it Help My Insurance Premiums?
Are Gambling Winnings Considered Earned Income For Social Security Recipients
Typically, the Medicare premium increase generally impacts higher-income peoples who can deal more easily with the increased costs. Do you have any questions about the lottery and how it, or other winnings and losses may affect your tax return and medical insurance costs? Feel free to give Alex Franch, BS EA at 781.849.7200 for assistance in planning your real-estate transactions. Worthtax has locations in Quincy, Weymouth and Dedham.
