When you bet on lotteries, raffles, horse races, and casino games, you risk losing money. The IRS considers this as a gambling loss and must be reported on your tax return.
However, you can deduct gambling losses only if you itemize deductions on your tax return. If you choose to take the standard deduction, you won’t get any deduction for your losses.
If you’re a gambler, chances are that you’ve won or lost money at some point. Whether at the casino, a Church raffle or your local poker game, it’s important to understand how you can deduct gambling losses on your tax return.
As with any deduction, a taxpayer must substantiate a deduction to receive credit for it. That means that records of each wager must be kept and verified to prove the amount you deducted is appropriate.
However, most people do not keep up with this kind of record-keeping. That’s where a tax lawyer can help.
The tax law firm of Lana Kurilova Rich PLLC can guide you through the complicated rules regarding gambling income and winnings, including deductible gambling losses. Our legal team is dedicated to providing the best possible service and helping you maximize your deductions. We also provide a free consultation with one of our skilled tax attorneys to ensure you’re getting the best possible results.
Whether you win a jackpot at the slots or pick a winner on a horse at the track, the IRS wants a slice of the action. That’s why it lets people deduct gambling losses on their taxes, but only if they itemize deductions (Form 1040).
Taxpayers can report gambling winnings at gross income on page one of their Form 1040 or as miscellaneous items on Schedule A if they itemize deductions. However, the 2%-of-adjusted-gross-income limit applies to miscellaneous itemized deductions.
To reduce the risk of an audit, taxpayers must keep detailed records detailing gambling losses and winnings. These should include the date, type of wager and location. Additionally, taxpayers should document the names and addresses of other gamblers who were present during the transaction. In addition, documentation should detail the amount of each winning and losing wager. This will help the IRS determine if the claim is credible. It also will ensure that you can receive the highest possible deduction of your gambling losses.
You can deduct gambling losses on your taxes, depending on your status. Generally, if you are in the trade or business of gambling (a “professional gambler”), your losses can net against your gambling winnings and other business expenses on Schedule C, Profit or Loss From Business.
Expenses related to gambling can include travel and lodging costs. It’s also important to save receipts and tickets for your gambling activities.
A gambler who regularly visits casinos and race tracks may have even more losses to deduct. Keeping detailed records is essential to ensure your tax deductions are accurate and avoid an audit.
Prior to the TCJA, gambling losses were deductible on Schedule A as miscellaneous itemized deductions, not to exceed 2% of adjusted gross income. However, under the TCJA, this deduction is suspended for tax years 2018 through 2025.
In the United States, gambling is a popular activity. It can be a great way to make money, but it’s also an easy way to lose it.
However, the IRS does allow people who gamble recreationally to deduct some of their losses as a tax credit, although this deduction cannot be carried forward to future years. It’s important to understand the IRS’s definition of a loss.
The first thing to remember is that gambling losses are only deductible up to the amount of winnings you report on your return. This means that if you win $500 but lose $50, you can only claim $50 in losses.
You can claim this gambling deduction on Schedule A, which is part of the tax return. It’s not subject to the 2% of adjusted gross income (AGI) reduction of miscellaneous itemized deductions or to the phase-out of itemized deductions for high-income taxpayers.