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• Can You Write Off Gambling Losses In Nj
• Writing Off Gambling Losses On Taxes
• Irs Write Off Gambling Losses
• Can I Write Off Gambling Losses In 2019
• Writing Off Gambling Losses

After applying the losses-cannot-exceed-winnings limitation, the allowable gambling loss deduction for a person who is not a professional gambler is claimed on Line 28 of Schedule A (Itemized Deductions). If you don’t itemize, you get no write-off. Also, amateur gamblers can only deduct actual wagering losses. Add up all the gambling losses you incurred throughout the year. Subtract the total of the losses from the total of the winnings to reduce your taxable liability. You can only deduct your losses up to the amount of your winnings. If you won $5,000 and lost $6,000, you may only claim the $5,000 in losses, which zeros out your liability. No, gambling losses are deductible only to the extent of gambling winnings. For more information, including documentation requirements, please see Can You Claim Gambling Losses on Your Taxes? View solution in original post 0. Gross gambling income is reported on page one of Form 1040, while gambling losses are a miscellaneous itemized deduction (not subject to the 2%-of-adjusted-gross-income (AGI) limit). Taxpayers often believe their winnings are immune from reporting unless they receive a Form W-2G. The rule for claiming gambling losses is that you can only claim up to the dollar amount you won gambling. If Form 1099G from the IRS shows gambling winnings of $5,000, you can claim losses of no more than $5,000, even if your losses were far greater.

There are plenty of reasons why you should keep a gambling diary or gambling log, but the best reason of all is simple—the IRS would be very unhappy if they decided to audit you and found out you didn’t have one.

A gambling diary, also known as a gambling log, is simply a written account of your wins and losses when you gamble. Some amateurs decide to keep them because they’ve gotten it in their head that they can lose a bunch of money gambling then write off all the losses on their taxes. Pro tip: You can only write off losses equal to wins.

Pros and regular gamblers keep them because of the Big House mentioned above. If you get audited by the IRS and you have a large amount of gambling income, they’re going to want to see some proof.

But what is a “large amount” of gambling income? What does a gambling diary or log even look like? Let’s dive in and take a look.

How Much You Need to Win for a Gambling Diary to Make Sense

For a gambling diary to actually make sense (which is to say, for it to be reasonable from a tax standpoint for you to start keeping one), you need to win over a certain amount each year. Below certain thresholds, you don’t need to report gambling income to the IRS.

Those thresholds are pretty straightforward. The first one is $600 or 300 times whatever you wagered. If you walk away with 1,000 bucks at roulette, then you’ll have to report the income.

The rules are a bit different for some other games though.

Poker tournaments, for example have a much higher threshold. You only have to report those winnings if you walk away with more than $5,000. Some fall in the middle. Real money Keno is treated differently at $1,500, and bingo and slot machines fall into the $1,200 range.

What makes things doubly confusing is exactly how you define “winnings.”

For Example:

If you sit down at a slot machine and win big on your first play, then keep playing until all that money is gone, do you have winnings in the eyes of the IRS? No.

In Your Gambling Diary, Track Wins and Losses by Session

If keeping a gambling diary meant I had to track every single play, I probably wouldn’t bother (and I doubt anyone else would either). Thankfully, that’s not how the IRS asks you to track your wins and losses.

Instead, the IRS wants you to track by session, where a “session” consists of any period of continuous play without cashing out. The only real caveat here is that a session can’t last more than a day.

So, what does that look like in practice? Let’s say you go to The Venetian, take a seat at a real money slot machine, and start playing. You win big on your first play, but you keep going until you’ve spent all your winnings (and then some). You’re there for an hour and a half, and when you’re done with the machine, you end up down $50—that’s a session.

For Example:

Let’s say you then head over to The Mirage to play blackjack. You bust on the first few hands, but then you start to do alright. You walk away up $100—that’s a session.

So, even though you are technically only up $50, the IRS is going to want to see those sessions separated out. They want to see that you lost $50 on slots at one casino and that you won $100 at blackjack at another casino.

Why do they care about this? Because it affects your adjusted gross income. When it comes time to pay your taxes, even if you were way down for the year, those winnings are still counted as income. If you make $50,000 for the year at your full-time job, and you won $10,000 but lost $20,000, your net income was $40,000, but the IRS is going to count your adjusted gross income as higher than $50,000.

This can affect the taxes you pay each year and may reduce certain tax benefits. The important thing to walk away with is that you must report that income. If the IRS decides to throw you an audit party, and you haven’t kept track of that income in a gambling log, that party isn’t going to be much fun.

Here’s What You Should Track in Your Gambling Log

Okay, hopefully you’re convinced that you should keep a gambling diary to keep the IRS off your back, but what exactly should you be tracking in there, anyway? It’s pretty clear that you should be tracking your “sessions,” but what does that look like?

Can You Write Off Gambling Losses In Nj

What the IRS Wants to See:

Mostly are amounts won and what days they were won. But if you’re under audit, that may not be enough. However, when it’s time for you to report your own income on your taxes (and you’re not under audit), you’re probably fine with just the amounts and the dates (I recommend the dates just to keep things clear in your head).

Beyond that, if you want to play it safe and stay in the good graces of the IRS if they do come knocking, I would recommend that you write down dates and times at the very least, and definitely the location you were playing at.

You’ll also want to be writing down addresses, maybe some specific wagers (especially wagers that won big and were enough for the establishment to issue you a W-2G). And you’ll even want to consider noting the names of people you were with or employees if you have that info.

The point of all that is just to keep you triple safe and to provide the IRS the ability to talk to whomever they need to talk to and make sure you’re not trying to pull a fast one.

Don’t Forget Your “Verifiable Documentation”

The IRS isn’t stupid. They don’t want to just see your little diary and say, “Oh, okay, that’s probably sufficient.”

They also want to see “verifiable documentation.” Basically, they want to see proof that the $10,000 you claim to have won over the year actually ended up somewhere (and isn’t a figure you made up so that you could write off your $10,000 in losses for the year).

What does that look like? It looks like banking records that show you deposited a check. It looks like canceled checks or credit records. It looks like receipts, proof that this money you made actually got spent in some fashion.

All that being said, fear of the IRS is not the only reason you need to be tracking your gambling in a gambling diary. It can also be incredibly useful to you as a gambler.

Keep a Gambling Log to See How You’re Really Performing

Here’s why I really love keeping a gambling log. It can give you a realistic view of how you’re performing!

Writing Off Gambling Losses On Taxes

As human beings, we tend to struggle to have a realistic picture of what our skills actually are. That’s just a universal truth about life. When it comes to gambling, I believe it can get even worse because we get out of the mindset of paying attention to the math and numbers and get caught up in the fun and amusement of it all.

This is especially true for dramatic wins and losses. A big win can make it feel like we’re really doing well (or getting really good at playing poker) when the numbers might show that, overall, we perform far better playing real money blackjack (or maybe that blackjack is just more profitable for us in the long term).

Keeping a gambling log is more than just dates and times and winnings for someone who is serious about improving their skill and playing to win. I think the best gamblers out there are the guys and gals who are rigorous about tracking what they’re doing and seeing where they can improve.

Irs Write Off Gambling Losses

However, what’s far more common is to see gamblers who basically have no clue what their skill level really is. When you put the screws to them, they usually can’t tell you more than anecdotes. Maybe one time, a few years ago, they won this huge pot. And another time they won this and that.

And yet these are the people who always seem to walk away down, who can’t quite seem to turn those few times they won into a consistent game.

Now, part of the problem with these types is almost certainly ego (or they’re just caught up in the magic of their few big wins and can’t see the bigger picture). But a gambling diary or gambling log could be of immense help to these guys and gals. It could help them improve their craft and really look at the facts instead of rolling the dice every time without a care.

Conclusion

A gambling diary is critical for anyone who gambles regularly. It keeps the IRS off your back and serves as additional proof that you won and lost what you claimed you won and lost.

But more than that, it can serve as a way of tracking your true performance and improving your skills.

Do you keep a gambling diary? Do you track anything I didn’t mention in your gambling log? Tell me about it in the comments!

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Did you have gambling losses last year? If so, you may be entitled to a deduction. Here is what you need to know at tax return time.

The most important rule

Can I Write Off Gambling Losses In 2019

The biggest single thing to know is that you can only deduct gambling losses for the year to the extent of your gambling winnings for the year. So if you won $2,500 gambling in 2014, the most you can deduct of your losses is $2,500 — no matter how much you lost. This limitation applies to the combined results from any and all types of gambling — playing the lottery, slots, poker, the horses, and all the rest. And the limitation applies to both amateur and professional gamblers.

After applying the losses-cannot-exceed-winnings limitation, the allowable gambling loss deduction for a person who is not a professional gambler is claimed on Line 28 of Schedule A (Itemized Deductions). If you don’t itemize, you get no write-off. Also, amateur gamblers can only deduct actual wagering losses. Other gambling-related expenses (transportation, meals, lodging, and so forth) cannot be written off.

An amateur gambler should report the full amount of his or her winnings as miscellaneous income on Line 21 on Page 1 of Form 1040. If your winnings exceed your losses, you cannot just report the net winnings on Line 21. Instead, report your gross winnings on Line 21 and your losses (up to the amount of your winnings) on Line 28 of Schedule A, assuming you itemize.

Over the years, quite a few court decisions have attempted to define what it takes to be a professional gambler. The bottom line is you must devote substantial time to gambling on a regular basis, and you must depend on gambling winnings as a meaningful source of income.

It also helps if you conduct your gambling activities in a businesslike fashion by keeping detailed records of wins and losses and developing and evaluating strategies.

If you can rightly claim professional gambler status, report your gross winnings as income on Line 1 of Schedule C of Form 1040 (Profit or Loss from Business). Report your losses (up to the amount of your winnings) and your allowable out-of-pocket gambling-related expenses (for transportation, 50% of out-of-town meal costs, out-of-town lodging, and so forth) as business expenses on Schedule C.

Note that a professional gambler’s allowable out-of-pocket expenses can be deducted in full on Schedule C without regard to the amount of winnings. In other words, you aren’t required to combine out-of-pocket expenses with gambling losses in applying the losses-cannot-exceed-winnings limitation.

Warning: The seemingly benign rule that a professional gambler’s winnings and losses belong on Schedule C can have a big negative impact in profitable years, because net Schedule C income gets hit with the dreaded self-employment tax. In some cases, this can make claiming professional gambler status more expensive than amateur status.

Form W-2G keeps winners honest

For most types of gambling at a legitimate gaming facility, you will usually be issued a Form W-2G (Certain Gambling Winnings) if you win $600 or more. The IRS gets a copy too, so you better make sure the gross gambling winnings reported on Line 21 of your Form 1040 (or on Line 1 of Schedule C if you are a professional) at least equal the sum of the amounts reported on any Forms W-2G you receive.

Record keeping basics

Whether you are an amateur or professional gambler, you must adequately document the amount of your losses in order to claim your rightful gambling loss deductions. According to the IRS, taxpayers must compile the following information in a log or similar record.

• The date and type of each wager or wagering activity.
• The name and location of the gambling establishment.
• The names of other persons (if any) present with you at the gambling establishment (obviously this requirement cannot be met at a public venue such as a casino or racetrack).
• The amount won or lost.

Writing Off Gambling Losses

You can document winnings and losses from table games by recording the number of the table and keeping statements showing casino credit issued to you. See also IRS Publication 529 (Miscellaneous Deductions) at irs.gov.

Per-session record keeping is apparently OK

In theory, you are supposed to record each gambling win or loss — from each spin of the slot machine, each poker hand, and each horse race. Of course, nobody actually does that. Thankfully, the IRS relented a few years ago by saying that casual slot players can simply keep a record of the net win or net loss amount for each gambling session. The Tax Court appeared to endorse this per-session approach in a 2009 decision. The casual slot player should then report the sum total of net winnings from all winning sessions as income on Line 21 of Form 1040 (the amount should at least equal the total amount of winnings reported on any Forms W-2G you receive). The sum total of net losses from all losing sessions can be deducted on Line 28 of Schedule A, subject to the losses-cannot-exceed-winnings limitation. Presumably, the per-session approach of recording net wins and losses from each gambling session will also be considered adequate record keeping for other types of gambling for both amateur and professional gamblers. Poker players, take note!

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