Gambling losses not handled correctly on form 1040

[skipandlj]

I had Gambling winnings I entered with W2-G.  My tax burden increased as expected.  I completed the questions and entered gambling losses which should have reduced my tax burden (only that portion that was increased by the gambling win).   The tax burden remained after entering losses with only minimal adjustment.  It should have been almost completely eliminated as my losses were almost equal to winnings.  To prove this out, I created a new tax return and did not enter gambling winnings and losses, recorded all values.  I went back in, added the winnings, noted the tax burden increase with each win.  I then added the loss and found it only reduced the tax burden by 1 of the win amounts.  I downloaded form 1040, Sched A and Sched 1 instructions along with form 1040 and ran the numbers manually and then called the IRS to confirm that based on the amount of my wins and losses, I effectively should only owe taxes on the other portions of my income.  How do you report issues like this to Turbo Tax for resolution?

[xmasbaby0]

Gambling

To enter the W-2G  or other documents For your Gambling winnings--Go to Federal>Wages & Income>Less Common Income>Gambling Winnings

You can enter your winnings, and then keep clicking through the interview to enter gambling losses.

https://www.irs.gov/help/ita/how-do-i-claim-my-gambling-winnings-and-or-losses

Gambling winnings are taxable income.  Losses are an itemized deduction.  If you do not have enough itemized deductions to exceed your standard deduction, your losses will have no effect.

https://blog.turbotax.intuit.com/income-and-investments/how-are-gambling-winnings-taxed-8891/

2024 STANDARD DEDUCTION AMOUNTS

SINGLE $14,600    (65 or older/legally blind + $1950)

MARRIED FILING SEPARATELY $14,600    (65 or older/legally blind + $1550)

MARRIED FILING JOINTLY $29,200    (65 or older/legally blind + $1550)

HEAD OF HOUSEHOLD $21,900    (65 or older/legally blind + $1950)

[skipandlj]

I exceed standard deductions without the gambling win/loss so that is not part of the issue.  I have used Turbo tax for about 10 years and the last 4 I have had Gambling winnings and losses to report without issues.  So unless the IRS agent I spoke with today is incorrect in their information on my tax situation....  The other option of course is for me to no longer utilize Turbo Tax.  I have 160 in to so far this year as we have to report to 3 states and federal and that does not include the efile costs.  

[skipandlj]

Perhaps for this year, the best answer is to simply file without utilizing this tool any longer so I can get the filing done and resolved quickly.  Thank you for the quick response.  We will take that approach for this year and a different option for next year.

[VolvoGirl]

Gambling Losses are an itemized deduction and you need to itemize on schedule A to use them.  So if your Standard Deduction is more they won't be used.   Even if you itemize deductions and use the losses, the increase in your AGI from the income may affect and reduce some credits on your return like the EIC.   And may cause more of your Social Security to be taxable.

Also deductions don’t reduce your tax 1 to 1.  If you are able to itemize you just get a percentage of your deductions back. Like if you are in the 25% tax bracket for a $100 deduction you will save $25. It isn't added on to your refund. Deductions reduce your income so you get taxed on a lower amount.

And that is just for the amount that puts you over the Standard Deduction. 

[skipandlj]

I Itemize on Schedule A.  My itemized deductions without the gambling losses are more than the standard deduction.  I do not get EIC or any credits over and above home mortgage interest credit and some small charitable contributions.  My tax scenario is very basic.  I only use Turbo Tax for convenience.  While my winnings are 5 digit, the increase in AGI is not affecting any other numbers.  I have run the two sets of returns next to each other (compared forms 1 with the winnings and 1 without.  I have almost exactly the same return AGI, taxes paid, etc all within under $500 difference) as I did in 2013 - dollar for dollar - including the gambling winnings and losses, charitable contributions, everything.  Yet it is showing that I somehow owe $5800 more in taxes than I did for 2023 and my tax bracket did not change either.   The IRS Agent did suggest I submit what Turbo Tax is calculating and let them fix it as they did for me in 2021 but a $5k difference is significant.

[skipandlj]

Sorry, that should indicate 2024 return and 2023 returns have numbers all within a $500 difference for all values when compare each value between the 2 years, not 2013.

[Anotheruser1]

For what it's worth, my situation was 3 W-2G's that I had taxes withheld at the time of winning, but my loss exceeded my winnings by the end of the year.  I made several versions testing the form in Turbo tax because after adding my losses I thought I would see the tax burden for the year reduce...It was only when I revised my W-2G's to have $0 as my federal withholding that I could see those taxes were already applied as my credit for taxes withheld.  I don't know if you are trying to claw back the taxes paid or just trying to reduce the burden, but after reading this thread I thought I was out of luck because I need to take the standard deduction.  It may or may not match your situation, but this thread helped me figure out my issue so I thought I would share.

[ThomasM125]

You will see your gambling losses reflected on line 16 of Schedule A. The total of your itemized deductions will show on line 12 of your Form 1040.

You would see your gambling winnings reflected on Schedule 1, line 8a. The total of your other income will appear on line 8 of your Form 1040. 

As long you verify that those entries are correct, your gambling winnings and losses are correctly stated on your tax return. If the income tax is not what you expect to see, there would have to be another reason for that outside of your gambling winnings and losses.

I suggest you compare your return line by line with your return from the previous year to see where there are differences and investigate them one by one to find out why they changed.

@skipandlj