A gambling loss is money lost on any individual wagering event or activity at a time. For example, if you drop a dollar into a slot machine and lose the dollar, you have a one dollar gambling loss. Gambling losses can only be deducted up to the total of your gambling winnings (that are included as income on your return).
The IRS suggests that gambling winning and losses be tracked in the following manner:
From IRS Publication 529:
Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings.
Your diary should contain at least the following information.
The date and type of your specific wager or wagering activity.
The name and address or location of the gambling establishment.
The names of other persons present with you at the gambling establishment.
The amount(s) you won or lost.
Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings; Form 5754, Statement by Person(s) Receiving Gambling Winnings; wagering tickets; canceled checks; substitute checks; credit records; bank withdrawals; and statements of actual winnings or payment slips provided to you by the gambling establishment.
