Claiming Gambling Losses Against Winnings

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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. For example, winnings from casino betting and wagering, New Jersey Lottery winnings on prize amounts exceeding $10,000, winnings from slot machines, raffles, bingo games, etc., are all taxable income. Nonresidents may only offset gambling winnings from New Jersey sources by gambling losses incurred in New Jersey during the same tax period. Gambling Losses To claim your gambling losses, you have to itemize your deductions. Gambling losses are a miscellaneous deduction, but - unlike some other miscellaneous deductions - you can.

Jun 04, 2019 The IRS requires you to keep a diary of your winnings and losses as a prerequisite to deducting losses from your winnings. This interview will help you determine how to claim your gambling winnings and/or losses. Information You'll Need. Your and your spouse's filing status. Amount of your gambling winnings and losses. Any information provided to you on a Form W-2G.

Six Tips on Gambling Income and Losses

Whether you roll the dice, play cards or bet on the ponies, all your winnings are taxable. The IRS offers these six tax tips for the casual gambler.

  • Gambling income includes winnings from lotteries, raffles, horse races and casinos. It also includes cash and the fair market value of prizes you receive, such as cars and trips.
  • If you win, you may receive a Form W-2G, Certain Gambling Winnings, from the payer. The form reports the amount of your winnings to you and the IRS. The payer issues the form depending on the type of gambling, the amount of winnings, and other factors. You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.
  • You must report all your gambling winnings as income on your federal income tax return. This is true even if you do not receive a Form W-2G.
  • If you’re a casual gambler, report your winnings on the “Other Income” line of your Form 1040, U. S. Individual Income Tax Return.
  • You may deduct your gambling losses on Schedule A, Itemized Deductions. The deduction is limited to the amount of your winnings. You must report your winnings as income and claim your allowable losses separately. You cannot reduce your winnings by your losses and report the difference.
  • You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or other documentation. You should also keep a diary or similar record of your activity. Your records should show your winnings separately from your losses.

Proof:

  • Bingo and similar games: Keep records of the number of games played, the cost of cards purchased, and amounts collected on winning cards.
  • Slot machines: Maintain a record of the machine number and all winnings by date and time the machine was played.
  • Casino table games (e.g., blackjack, craps, poker and roulette): Write down the number of the table where you played and any casino credit information.
  • Racing (horses, harness, dog, etc.): Keep track of the number of races, the amounts of your wagers and the amounts you won and lost.

For residents of Connecticut, Illinois, Indiana, Kansas, Massachusetts, Michigan, North Carolina, Ohio, Rhode Island, West Virginia, and Wisconsin, beware. These states do not allow amateur gamblers to deduct their losses from their winnings. For example, if an amateur gambler in Ohio wins $50,000 and loses $50,000, they may not deduct their losses even though they technically broke even.

This is not the case if the taxpayer is a professional gambler such as a professional poker player. They may deduct gambling losses from their state income taxes but they are aggressively challenged for their status as professional.

So remember to consider the tax implications for gambling winnings and losses and plan accordingly based on your gambling status and the state you live in.

IRS Resources

  • Publication 525, Taxable and Nontaxable Income
  • Publication 529, Miscellaneous Deductions
  • Tax Topic 419, Gambling Income and Expenses
  • Form W-2G, Certain Gambling Winnings

IRS YouTube Videos:

  • Gambling Winnings and Losses – English Spanish ASL
  • Record Keeping – English Spanish ASL

IRS Podcasts:

  • Gambling Winnings and Losses – English Spanish

Follow us: @the_tax_lady TACCT on Facebook

Six Tips on Gambling Income and Losses

Whether you roll the dice, play cards or bet on the ponies, all your winnings are taxable. The IRS offers these six tax tips for the casual gambler.

  • Gambling income includes winnings from lotteries, raffles, horse races and casinos. It also includes cash and the fair market value of prizes you receive, such as cars and trips.
  • If you win, you may receive a Form W-2G, Certain Gambling Winnings, from the payer. The form reports the amount of your winnings to you and the IRS. The payer issues the form depending on the type of gambling, the amount of winnings, and other factors. You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.
  • You must report all your gambling winnings as income on your federal income tax return. This is true even if you do not receive a Form W-2G.
  • If you’re a casual gambler, report your winnings on the “Other Income” line of your Form 1040, U. S. Individual Income Tax Return.
  • You may deduct your gambling losses on Schedule A, Itemized Deductions. The deduction is limited to the amount of your winnings. You must report your winnings as income and claim your allowable losses separately. You cannot reduce your winnings by your losses and report the difference.
  • You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or other documentation. You should also keep a diary or similar record of your activity. Your records should show your winnings separately from your losses.

Proof:

  • Bingo and similar games: Keep records of the number of games played, the cost of cards purchased, and amounts collected on winning cards.
  • Slot machines: Maintain a record of the machine number and all winnings by date and time the machine was played.
  • Casino table games (e.g., blackjack, craps, poker and roulette): Write down the number of the table where you played and any casino credit information.
  • Racing (horses, harness, dog, etc.): Keep track of the number of races, the amounts of your wagers and the amounts you won and lost.
Claiming gambling losses against winnings numbers

For residents of Connecticut, Illinois, Indiana, Kansas, Massachusetts, Michigan, North Carolina, Ohio, Rhode Island, West Virginia, and Wisconsin, beware. These states do not allow amateur gamblers to deduct their losses from their winnings. For example, if an amateur gambler in Ohio wins $50,000 and loses $50,000, they may not deduct their losses even though they technically broke even.

Claiming Gambling Losses Against Winnings Reported

This is not the case if the taxpayer is a professional gambler such as a professional poker player. They may deduct gambling losses from their state income taxes but they are aggressively challenged for their status as professional.

Claiming Gambling Losses Against Winnings Numbers

So remember to consider the tax implications for gambling winnings and losses and plan accordingly based on your gambling status and the state you live in.

IRS Resources

  • Publication 525, Taxable and Nontaxable Income
  • Publication 529, Miscellaneous Deductions
  • Tax Topic 419, Gambling Income and Expenses
  • Form W-2G, Certain Gambling Winnings

IRS YouTube Videos:

  • Gambling Winnings and Losses – English Spanish ASL
  • Record Keeping – English Spanish ASL

IRS Podcasts:

  • Gambling Winnings and Losses – English Spanish

Claiming Gambling Losses Against Winnings Taxable

Follow us: @the_tax_lady TACCT on Facebook