Gambling Win/loss Deductions
Once this was accomplished, Judge Wherry then relied upon the amount of gambling losses as determined by the IRS of gambling winnings and gambling losses suggested or agreed upon by the IRS. Instead of using the casino win/loss statement as a shield for the taxpayers, the IRS and the Court used it as a sword against the taxpayers. To deduct your losses from gambling, you will need to: Claim your gambling losses on Form 1040, Schedule A as Other Miscellaneous Deduction (line 28) that is not subject to the 2% limit. You cannot deduct gambling losses for an amount greater than your gambling income. Limitations on loss deductions. The amount of gambling losses you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000, or carry it. If taking the standard deduction, no deduction is allowed for gambling losses. Gambling (or gaming) losses may be taken only to the extent of gambling winnings (note 288 will generate). On screen A - Itemized Deductions Schedule, enter the losses as Other not subject to 2% limit (line 16 starting in Drake18; line 28 in Drake17 and prior). Amount of your gambling winnings and losses. Any information provided to you on a Form W-2G. The tool is designed for taxpayers who were U.S. Citizens or resident aliens for the entire tax year for which they're inquiring.
Gambling losses are indeed 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 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.
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Keeping 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. This includes:
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- lotteries
- raffles
- horse and dog races
- casino games
- poker games
- and sports betting
Your records must 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
- and the amount you win and lose
Other documentation to prove your losses can include:
- Form 5754
- wagering tickets
- canceled checks or credit records
- and receipts from the gambling facility
Limitations on loss deductions
The amount of gambling losses you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000, or carry it forward to future years.
Reporting gambling losses
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.
- You will not be able to deduct any of your losses.
Only gambling losses
Kentucky Gambling Loss Deduction
The IRS does not permit you to simply subtract your losses from your winnings and report your net profit or loss. 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.
The bottom line is that losing money at a casino or the racetrack does not by itself reduce your tax bill. You need to first owe tax on winnings before a loss deduction is available. Therefore, at best, deducting your losses allows you to avoid paying tax on your winnings, but nothing more.