Gambling losses are tax deductible, but only to the extent of your winnings and requires you to report all the money you win as taxable income on your return.
The deduction for gambling losses is only available if you itemize your deductions. If you claim the standard deduction, then you can't reduce your tax by your gambling losses.
Remember to keep track of your winnings and losses:
The IRS requires you to keep a log of your winnings and losses as a prerequisite to deducting losses from your winnings. Your winnings include each win during the year.
The IRS does allow you to net your wins and losses on the same day for the same type of wagering if you meet certain requirements. This means that if you win at the slots one day and lose the next day, you have to report the winnings on your tax return as income and then deduct the losses separately as an itemized deduction.
Your records need to include:
- the date and type of gambling you engage in
- the name and address of the places where you gamble
- the people you gambled with
- the amount you win and lose
Other documentation to prove your losses can include:
- Form W-2G
- Form 5754
- wagering tickets
- canceled checks or credit records
- receipts from the gambling facility
Remember: To report your gambling losses, you must itemize your income tax deductions on Schedule A. You would typically itemize deductions if your gambling losses plus all other itemized expenses are greater than the standard deduction for your filing status. If you claim the standard deduction, you:
- are still obligated to report and pay tax on all winnings you earn during the year
- will not be able to deduct any of your losses
- You can include in your gambling losses the actual cost of wagers plus other expenses connected to your gambling activity, including travel to and from a casino. Keep in mind that the IRS does not permit you to simply subtract your losses from your winnings and report the difference on your tax return. And if you have a particularly unlucky year, you cannot just deduct your losses without reporting any winnings. If the IRS allowed this, then it's essentially subsidizing taxpayer gambling.
Click here for helpful information from TurboTax regarding reporting your gambling winnings and losses.
And for information from the IRS: https://www.irs.gov/taxtopics/tc419
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