Dear Tax Talk,

I won gambling money on a cruise ship in international waters; they gave me a form for Florida. I live in Texas. How do I report the winnings? Can I also use Louisiana losses toward this?

— Deborah

Dear Deborah,

Not only were you lucky on the high seas, you’re also lucky there are no state income taxes involved. Neither Florida nor Texas impose individual income taxes, so your only partner in the winnings is Uncle Sam.

The cruise ship most likely handed you a Form W-2G for gambling winnings and of course they will provide the IRS a copy. The IRS will certainly want to see your winnings on your 2009 Form 1040.

Gambling winnings are reported on Form 1040 Line 21. The IRS has released the 2009 Form 1040. Depending on the type of wager, taxes may have been withheld. These taxes would be included with other withholding on Form 1040 Line 61.

Gambling losses are deductible as miscellaneous itemized deductions on Schedule A Line 28. The IRS has not released the 2009 Schedule A, so use the equivalent line when completing your returns for 2009.

Gambling losses are not reduced by 2 percent of adjusted gross income, or AGI, as are other miscellaneous deductions. Your gambling losses can come from any source as long as they were incurred in the same year. You can offset the cruise ship winnings with Louisiana casino, lottery ticket, pari-mutuel and similar gambling losses.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

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