Q:       I see football pools, March Madness pools and NASCAR boards in my place of employment, bars and restaurants. Are they legal?

A:        Football, basketball and NASCAR pools are legal only if all the entry fees for the pools are paid out to the participants. In 2003, the Ohio Legislature responded to citizens’ questions about gaming pools by creating a definition of “pools not conducted for profit.” A “pool not conducted for profit” is defined as an arrangement in which participants give valuable consideration (usually money) for a chance to win a prize, and the total amount wagered is distributed among the participants. It is important to understand that only those who participate in the pool can receive money from pool winnings, and that all entry fee money must be distributed to participants. For example, a Super Bowl football pool with 100 squares at $5 per square would pay $500 to the winners. The person running the game must pay out all $500, and cannot pay out $450 and buy $50 worth of beer for the players as they watch the game. People wishing to join pools can do so in both private and public places.

Q:       I see raffles tickets being sold at many high school sporting events. Who can sell tickets and profit from raffles in Ohio?

A:        In Ohio, certain non-profit organizations can conduct a raffle without a license. Raffles are defined as “a form of bingo in which one or more prizes are won by one or more persons who have purchased a raffle ticket.” Raffle winners are determined through a drawing of numbered ticket stubs corresponding to the raffle tickets sold.                   

                        Schools, veteran’s organizations, fraternal organizations, sporting organizations and other charitable organizations (501(c)(3), (c)(4), (c)(7), (c)(8), (c)(10) or (c)(19) non-profit entities) may conduct raffles. The 501(c)(3) organizations may keep all of the raffle profit, but the other above-listed organizations can keep only 50 percent of the profit, and must give the other 50 percent of the profit to a 501(c)(3) organization or to a federal, state or local governmental entity. Authorized charities may conduct an unlimited number of raffles at an unlimited number of locations.

Q:       Can my friends and I legally play poker for money at my home or the neighborhood bar?

A:        You can play poker, Texas hold ‘em or other card games at your home legally as long as only the players profit from the game. It is, however, illegal for anyone to charge the players to play the game, or to charge for a seat or to take a cut or rake from the game. While you can play at home, it is illegal for you to play at the neighborhood bar because it is a public place and not a private place like your house. It is also illegal to conduct a poker game (a game of chance rather than skill) to profit a non-player. Technically, two friends can wager $10 on the Browns-Bengals game in a house, but they cannot make that same wager or bet at the football stadium. Making a bet in a public place is a minor misdemeanor.

Q:       What organizations can conduct bingo and instant bingo?

A:        Both bingo and instant bingo in Ohio are licensed by the Attorney General of Ohio. Only 501(c)(3) organizations and 501(c)(4), (c)(7), (c)(8), (c)(10), and (c)(19) veteran, fraternal, sporting, volunteer firefighter organizations and volunteer rescue service organizations that have been actively conducting their charitable purpose for the past two years can be licensed. Licensed charities are now permitted to have retail businesses sell instant bingo tickets for them, so many organizations that once operated traditional bingo games have now opted to operate only instant bingo games. The locations that sell instant bingo tickets have increased from fewer than 100 in early 2012 to more than 700 today.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Columbus attorney Kurt Gearhiser. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

            Ohio’s recently opened casinos give residents an increasing number of in-state gambling options, but whether gambling takes place at a state casino, a racetrack or elsewhere, gamblers should be aware that tax consequences may follow.

Q:        Do I have to report my gambling winnings on my federal tax return?

A:        Yes. Gambling winnings are generally taxable and must be reported your tax return. If you file IRS Form 1040, report your gambling winnings on the “other income” line (line 21). Other income includes winnings from lotteries, raffles, horse races and casinos. It also includes cash winnings and the fair market value of prizes, such as cars and trips.

Q:        Isn’t it true that I only have to report my winnings if a gaming organization gives me an income tax form?

A:        No. It is a common misconception that you don’t need to report gambling winnings on your federal tax return unless you receive a Form W-2G from the payer. In fact, you must report your gambling winnings even if you did not receive documentation when you won the money or prize.

Q:        If I have to report all of my gambling winnings anyway, then why bother with Form W-2G?

A:        The gaming organization or other payer of gambling winnings must issue Form W-2G (“Certain Gambling Winnings”) to winners under certain circumstances. For example, if the gambling winnings are subject to federal income tax withholding, the payer should issue the winner a Form W-2G. Winners should also receive forms when they have:

• $1,200 or more in gambling winnings from bingo or slot machines;
• $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
• More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
• $600 or more in gambling winnings (except winnings from bingo, keno, slot machines and poker tournaments) and the payout is at least 300 times the amount of the wager.

Q:        If I itemize deductions, can I at least offset my gambling winnings with my losses?

A:        Yes, but you can’t deduct gambling losses that exceed your winnings. Also, you can’t simply reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income, and then claim allowable losses separately. To claim gambling losses up to the amount of your total winnings, use Form 1040, Schedule A, “Itemized Deductions,” under “Other Miscellaneous Deductions.”

            If you plan to deduct your gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings. Your records should show winnings separately from losses. IRS Publication 529, “Miscellaneous Deductions,” provides details about the type of information you should keep in a gambling win/loss diary and the kinds of proof you should keep in your records.

Q:        Where can I get more information about gambling income and losses?

A:        For more information, see IRS Publication 529 or Publication 525, Taxable and Nontaxable Income. Both publications are available at IRS.gov, or you can call 800-TAX-FORM (800-829-3676). You can also type “gambling” in the IRS.gov search box to find articles about reporting and deducting gambling winnings.

The information for this “Law You Can Use” column was provided by the Internal Revenue Service. It was prepared by the Ohio State Bar Association. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.