<p>How does gambling play out in FAFSA?
This year, my mother gambled and won approximately 25k, but lost it back to the casino.
My family makes very low wages, so I won't be able to pay for college.
How much will the gambling affect my financial aid? :(
It has to be added to the AGI, correct?</p>
<p>Asked and answered in [your</a> own thread](<a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/1420484-how-does-gambling-losses-factor-into-income-question-college-applications.html]your”>http://talk.collegeconfidential.com/financial-aid-scholarships/1420484-how-does-gambling-losses-factor-into-income-question-college-applications.html) in November.</p>
<p>Yes, the gambling will be added to AGI.
It will then be deductible as part of Schedule A on the tax return.
If she won 25k in one shot, she should have a W2-G showing those winnings.</p>
<p>What might help is that while it is included in AGI, it is not included in “Earned Income” which is also reported - it goes on line 21 of the 1040 form. You will need to fill out the FAFSA correctly, reporting it as part of AGI. Then after you get your report back telling you your EFC you may need to contact Financial Aid offices directly to ask for professional judgement. </p>
<p>You need to talk with your mother and explain how this impacts your ability to go to college. Nothing can be done about last year, and it doesn’t mean she can’t go to the casino, but if she does she needs to put the winnings away and not touch them. She can’t adjust her “budget” of how much she can gamble, because during the college years, it will cost you/her dearly.</p>
<p>
Actually it does the opposite of help. The earned income reported on FAFSA is used to calculate certain allowances such as those for payroll taxes. Those allowances reduce the income available for calculating the EFC in FAFSA. As gambling winnings do not qualify for the allowances, they have a higher impact on the EFC than earned income.</p>
<p>While for federal purposes, gambling losses to the extent of gambling winnings are shown on Schedule A, not all states follow this treatment. The $25,000 of winnings are likely taxable for state purposes with no corresponding deduction of losses to the extent these winnings.</p>
<p>Did your mom keep a documented record of her losses? If not, then she won’t be able to deduct her losses. </p>
<p>It’s kind of sad that a low-income person would win $25k and then turn around and gamble it away. :(</p>
<p>Since this increase on FAFSA may prevent you from getting the aid you need, you may need to take a gap year and then next year this won’t show up.</p>
<p>Swimcatsmom is right: If she had gambling income, that must be reported to the IRS and will be included as income on her tax returns. From a tax standpoint documented gambling losses (i.e.must have receipts/records) can be used as an itemized deduction but only up to the amount of any gambling income (not any other type of income) on the tax return.</p>
<p>OP the casino’s tracks the losses of its customers. They do this when she plays with her players card. Before your Mom has her taxes done she should ask the casino for the print out of her loss records (which they will be glad to give), and the losses should off set her winnings.</p>
<p>legitamate is correct, in most cases the casino can provide a win/loss statement outlining the net winnings or losses for the year. This can be used to substatiate writing off all of the winnings on schedule A. However, they still have to be reported.</p>
<p>Swimscatsmom is correct - allowances are calculated based on the earned income. But that is because they are only paid on the earned income - payroll taxes are not deducted from winnings.</p>
<p>Ultimately, the gambling winnings were income that was available to your family - and your mother unfortunately used it to entertain herself in the casino. Flipping works with small winnings, because they are not reported. But larger winning are reported, and have to be shown on the tax return. If the IRS wanted to be sticklers, they could require the casinos to report ALL winnings for their card holders, even if they can be deducted.</p>
<p>Just as a heads up, your mother needs to be prepared for the rest of what this may end up doing to her tax return. With a low income, she may have been eligible for the earned income credit, but may also have lost that, because even if her earned income is in the eligible range, her AGI may be above the allowed limit.</p>
<p>I don’t mean to make things worse, but she needs to be prepared, in case her refund isn’t anywhere near what she is expecting.</p>
<p>*most cases the casino can provide a win/loss statement *</p>
<p>I don’t know if that’s true. If the mom didn’t participate in a card program, or something that tracked her gaming efforts, there wouldn’t be a record.</p>
<p>I’d say that in “some cases” the casino can provide documentation. When people deal with cash at the tables or slots and don’t use a casino loyalty card, there wouldn’t be a record of losses.</p>
<p>Even if you have a record of losses and can deduct them on your tax return, it does not help for FAFSA. Gambling winnings are included in the AGI. Gambling losses are reported as an itemized deduction on schedule A and Schedule A deductions do not reduce the AGI. They come after the AGI on the tax return. This helps reduce taxes, but for FAFSA, it is the AGI that counts. Itemized deductions are not reported anywhere on FAFSA. </p>
<p>I doubt that any FA officer is going to (or even is able to) make any sort of adjustment for gambling losses.</p>