Gambling surprise for retiree?

Question

Retiree loves the slots. Plays all day long, wins some, loses some. Comes out even if she's lucky. I've told her for years to stay out of the casinos, she tells me to mind my own business.

This year she has about 15,000 of gambling winnings and about 20,000 of gambling loses. Winnings on line 21, losses to the extent of gains on schedule A.

Wait a minute - owes $1000 when last year had a refund of $500!

What's going on here?

Ah - the increase in provisional income made an extra $10,000 in her social security taxable even though she didn't have a dime in additional "income"!

Am I missing something here?

Phil Marti · Accepted Answer

You mean in addition to someone who takes your advice?  No.Maybe she'll listen now.

John H. Fisher · Answer

Make a note of it!!! Additional consequences are that one might lose the ability to claim their parent as an exemption (even if the parent's social security is minimal) because the win (actually loss) shows up as income to the parent. Veterans who might other wise qualify for medical benefits, at no cost, lose that benefit (even though there was actually a loss) 'cause the taxpayer must list the winnings as income. As you mention, Social Security income may become taxable (even though the gambling has produced a loss). Those who cannot itemized deductions also must eat the tax created by winnings which cannot be deduction (even though the winnings may have developed into a loss).

SAD!!!!

Gambling surprise for retiree?

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