Are Gambling Losses Deductible?

Person at poker table revealing five-card draw hand of royal flush
Are gambling losses tax deductible? Yes, they are. You can write off gambling losses even after the passage of the Tax Cuts and Jobs Act (TCJA). Nonetheless, if you regularly gamble at Rivers Casino or Harrah’s Joliet, wins and losses can affect your federal income tax statement.
Learn about gambling and taxes here at Pasquesi Sheppard, serving folks in Chicago, Lake Bluff, and beyond.

Gambling Losses and Tax Deductions

You can write off gambling losses as a miscellaneous itemized deduction. While miscellaneous deductions subject to the 2% of adjusted gross income floor are not allowed for 2018 through 2025 under the TCJA, the deduction for gambling losses isn’t subject to that floor. So, gambling losses are still deductible.
But the TCJA’s near doubling of the standard deduction for 2018 (to $24,000 for married couples filing jointly, $18,000 for heads of households and $12,000 for singles and separate filers) means that, even if you typically itemized deductions in the past, you may no longer benefit from itemizing.Itemizing saves tax only when total itemized deductions exceed the applicable standard deduction.
Be aware that the deduction for gambling losses is limited to your winnings for the year. Any excess losses cannot be carried forward to future years. Also, out-of-pocket expenses for transportation, meals, lodging and so forth cannot be deducted unless you qualify as a gambling professional.
And, for 2018 through 2025, the TCJA modifies the limit on gambling losses for professional gamblers so that all deductions for expenses incurred in carrying out gambling activities, not just losses, are limited to the extent of gambling winnings.

How to Claim a Deduction for Gambling Losses

To claim a deduction for gambling losses, you must adequately document them. Here’s how you document your gambling losses to write them off:

  1. Record the date and type of gambling activity—no matter poker, roulette, craps, or horse races.
  2. Record the name and address of the gambling establishment.
  3. Record the names of other persons (if any) present with you at the gambling establishment. (Obviously, this is not possible when the gambling occurs at a public venue such as a casino, race track, or bingo parlor.)
  4. Record the amount of money won or lost.

You can document income and losses from gambling on table games by recording the number of the table you played and keeping statements showing casino credit issued to you. For lotteries, you can use winning statements and unredeemed tickets as documentation.
But what about taxes on winnings? Learn more below.

Do You Have to Pay Taxes on Gambling Winnings?

Yes, winnings are subject to your regular federal income tax rate. In other words, you must report 100% of your gambling wins as taxable income. Even the value of complimentary goodies—i.e., “comps”—provided by gambling establishments must be included in taxable income as winnings.
However, under the TCJA, you may pay a lower rate on gambling winnings this year. The TCJA has effectively reduced the rate for gambling winnings.
Amounts you win may be reported to you on IRS Form W-2G (“Certain Gambling Winnings”). In some cases, federal income tax may be withheld, too. Anytime a Form W-2G is issued, the IRS gets a copy. So if you’ve received such a form, remember that the IRS will expect to see the winnings on your tax return.

Do Gambling Losses Trigger an Audit?

Failure to report adequately gambling winnings or losses may trigger an audit, yes. As we have suggested, you should document your gambling excursions. Documenting your gambling activities will help you in the event of an audit. The IRS will allow your losses if you can demonstrate the amount of your winnings and losses.

Contact Pasquesi Sheppard for Help Writing Off Gambling Losses

Please contact us if you have questions or want more information about the tax treatment of gambling wins and losses.

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