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January 10, 2013

Gambling Income in the City of Columbus, Ohio is Now Taxable

The city of Columbus has seized an opportunity to increase revenue and widen the tax base.  Last summer, the Columbus city council unanimously approved an ordinance that imposes a 2.5 percent income tax on gambling winnings.  The tax is effective as of June 1, 2012 and will be given retroactive application. In enacting this gambling tax, the city of Columbus has caught up with Ohio’s other cities that host casinos—Cleveland, Cincinnati, and Toledo—who already impose an income tax on gambling winnings.  The tax applies to a city resident who wins a jackpot in Columbus or at a casino in Las Vegas.  It also applies to non-residents who win a jackpot in Columbus. For more information, see the city of Columbus’ 2012 income tax newsletter, which can be found here.

No Deduction for Gambling Losses

Importantly, the tax will not allow gamblers to offset their gambling winnings with gambling losses, unless the gambler qualifies as a professional. Whether you are a professional gambler is a question of federal law and requires that you gamble full-time to earn a livelihood.  The tax lawyers at Nardone Law Group have previously written on how to qualify as a professional gambler to obtain beneficial tax treatment with the Internal Revenue Service (the “IRS”).  From a state income tax perspective, the city of Columbus’ disallowance of a deduction for gambling losses is at odds with the state of Ohio.  Beginning on January 1, 2013, amateur gamblers in Ohio will be allowed to claim a deduction for gambling losses. The new Ohio law allows amateur gamblers in Ohio to deduct gambling losses to the extent of their gambling winnings from their Ohio income tax, thus lowering their state tax bill and creating a very advantageous tax benefit that was previously not available. 

The city of Columbus, however, will not allow gamblers to deduct their gambling losses from their gambling winnings, unless they meet the test for qualifying as a professional gambler.  What this means is that most gambling income at a Columbus casino will be subject to the tax.  This tax will affect the vast majority of gamblers whether they are residents of Columbus or whether they are simply visiting from out of state to gamble.  Further, the city of Columbus and the IRS share information.  Therefore, if you are a resident of Columbus and have reported gambling winnings to the IRS on your federal income tax returns, that information will be shared with the city.  As a result, your gambling income needs to be properly reported on your city tax return or you risk being audited.

Contact Nardone Law Group, LLC

If you have gambled in the city of Columbus, Ohio, you should contact an experienced tax lawyer today. The tax lawyers at Nardone Law Group, LLC have vast experience representing clients before the IRS and the state of Ohio. Our experienced tax lawyers will thoroughly review your case to ensure that you are properly reporting your gambling income. Contact us today for a consultation to discuss your case.

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January 10, 2013

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