If you lose money gambling, you might be able to deduct it on your tax returns. However, before you can claim the deduction, you'll have to meet two important requirements. First, the IRS will want you to itemize all of your deductions. Second, you can only deduct gambling losses to the extent that you have gambling winnings.
Rules for Deducting Gambling Losses Under the new law, those who itemize deductions will continue to be able to deduct gambling losses up to the amount of their total winnings. For example, a slot player who wins $25,000 in jackpots may deduct up to that amount in verifiable gaming losses when they fill out an itemized tax form. Gambling losses are still deductible only to the extent of gambling winnings, but gambling expenses, such as travel to and from a casino, are deductible only to the extent of gambling winnings for both types of gamblers. Dec 18, 2018 Losses are allowed as an itemized deduction dollar for dollar against the gain. Gambling losses cannot be greater than gambling wins for the tax year. Example: John wins $23,500 during the year playing slots and other casino games. His gambling losses are $37,900.
Claiming the Gambling Deduction
The way that you claim the gambling deduction is relatively simple. First, you have to file Schedule A and itemize your tax deductions. This means that you can't claim the standard deduction, but you can write off expenses like your state income tax, mortgage interest, property taxes, car registration tax and charitable donations. If you have gambling losses, you write them off as 'other miscellaneous deductions' on line 28 of Schedule A, where they get combined with your other itemized deductions to reduce your taxable income.
Deduction Rules
Mass Taxes Gambling Losses Deductible
The IRS will only let you deduct losses to the extent that you win. For instance, if you lose $3,000 on one trip to the casino and win $2,100 on another trip in the same year, you can write off $2,100 in losses to offset the $2,100 in winnings, leaving you with a total of $900 of taxable gambling income. If you lost $1,000 on one trip and won $9,500 on another, though, you could claim the entire $1,000 in losses to reduce your net income from gambling to $8,500.
Proving Your Gambling
If you claim a gambling loss deduction, you will have to prove that you are entitled to it. Casinos send a form W-2G when you win to let the IRS know that they paid you, but it's up to you to establish your losses. The IRS requires you to keep tickets or receipts and a diary of your winnings and losses to substantiate your deduction. If you can get a printout from the casino of your gambling activity, such as if you use a player's club card, it may be helpful.
Professional Gambling
The rules for professional gamblers are different. A professional gambler makes a business out of gambling. He can write off his gambling losses and any expenses that he incurs for gambling -- like travel -- to offset gambling income. Since gambling is a business, he would file a Schedule C to report his income and expenses and would also have to pay self-employment taxes on his profits.
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About the Author
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the 'Minnesota Real Estate Journal' and 'Minnesota Multi-Housing Association Advocate.' Lander holds a Bachelor of Arts in political science from Columbia University.
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