Can You Write Off Gambling Losses on Taxes?

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Here’s another tax question we’ve received recently, with the caveat that we are not accountants and we encourage players to consult with an accountant with gambling law familiarity:

Can you write your winnings and losses off on your federal taxes, mostly losses of course?

Paul F.

There is a mechanism for being able to claim gambling losses on your taxes. However, not all tax filers are eligible for this. Here are things that you should know.

You Must Be Itemizing Deductions

Many tax filers in the United States rely on the standard deduction – it’s a deduction that’s granted automatically for a certain amount, which changes with inflation each year, and also was increased substantially a few years ago with tax laws changes passed by Congress.

To be eligible to itemize, you would effectively need to submit more deductions than the amount of the standard deduction. If your various deductions get you there, you’re able to incorporate gambling losses into your itemized deductions. Otherwise it’s considered covered by that standard deduction.

If you itemize, losses can be deducted up to the total amount of winnings reported – if you won $10k and lost $20k, you can only deduct $10k since that’s what you won. If you won $10k and lost $5k, you can deduct $5k since you have enough winnings to cover all of your losses.

You Must Be Reporting ALL Wins and Losses

Many players get tripped up by the fact that you have to report all your winnings and all your losses to do this, not just what’s been reported to the IRS on jackpot forms. If you are not doing this, you are leaving yourself open to trouble in the case of an audit.

What does this mean? Each time you win on a session, you report that winnings as income. Each time you lose on a session, you can deduct those losses against your winnings as income.

The effect of this is it drives your overall income up, but then you’re able to claim back losses up to the winnings in that income.

You Must Keep Diligent Records

We’ve seen plenty of players advise others to just grab win/loss records off the casino websites. But the IRS advises this isn’t good enough for proof, and advises gambling diaries, receipts from ATMs, tickets and other such record-keeping proof to truly prove your gambling activity. Depending on the type of game you’re playing, they have recommendations for what you should be recording.

Why are win/loss records not enough? Because if you forget to put in your card, the card reader doesn’t work, you leave your card behind by accident and someone else then gambles with it in the machine… it’s far from a foolproof system.

If you don’t do this, and get audited, it’s another issue you’ll have to contend with, and they may not accept the deductions if you can’t adequately prove your play.

Takeaway

So, gambling losses can be written off if you qualify, but there’s additional steps to take to ensure you’ll be fine if the IRS decides to audit you. Hopefully this helps all of those wondering what is possible in terms of gambling deductions.

Have a question? Submit yours here!


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12 Replies to “Can You Write Off Gambling Losses on Taxes?”

  • Elizabeth Palmer says:

    Good article. I learned the hard way about record keeping. I won over $45,000.00 playing bingo and additional $30,000.00 from the slot games, and claimed wins/loses and my tax return. My return was audited that year and the records I had were complete, but were not enough. The IRS agent said exactly what you said, keep a diary or journal of your playing, spending, winning etc. Fortunately, I only had to pay an additional $1,500.00 in taxes, which considering, wasn’t much. Now, every trip, everything is documented. Just in case. Thanks for the insight, enjoy reading your articles. Keep up the good work.

    • FlipTheSwitch.com says:

      We’re sorry you had to go through that experience, Elizabeth, but appreciate you sharing your experience, and we hope others learn from what you shared as well!

  • SherriB (Squealy Pig) says:

    As a CPA, I get nervous and cringe when I see bad advice circulating through social media posts. I clicked on this to see how this information was presented and WOW, you are spot on. I honestly haven’t seen any tax information written this well and easy to understood for the non CPA types. Well done BC & staff!!

    • FlipTheSwitch.com says:

      We’re with you on the advice, which is why we did this post and aimed to keep it as simple as possible. We’ve seen the types of posts you mention and wanted to have something more helpful.

  • Mandi says:

    Can you use withdraws shown from your bank for online gambling?

    • FlipTheSwitch.com says:

      The online sites themselves have very accurate recordkeeping because they don’t need a card to track your bets and wins. Therefore their reporting will be pretty helpful, and your bank withdrawals/deposits can back up that data for more robust documentation.

  • Annette says:

    If you win a hand pay is it better to take it as cash or a check? TIA

    • FlipTheSwitch.com says:

      Hi Annette – There’s no better or worse in general – we just recommend doing what makes the most sense for you. Some player like a check as they know they’re going home with the money, but there’s no “best” option here.

  • Cathy says:

    If you win a jackpot but spend all or most of it, is your winnings for the session the net win or do you have to report the whole amount on the w2g on your tax report?

    • FlipTheSwitch.com says:

      A jackpot is based on a single wager, so paperwork by the casino to the IRS will be filed for the entirety of the win based on that wager, not the whole session.If you qualify to deduct losses against your wins, that’s when other wagers can factor in to your taxes at the time you file. But the jackpot will be filed as won.

  • Pat Driscoll says:

    The $1,200 figure was set in the 70’s. Inflation adjustments should of been agreed upon at that time they instituted the taxation. Our Legislators need to adjust the tax code. 2024 figure should be $2,400. Anyone else agree?

    • FlipTheSwitch.com says:

      The IRS even seems to agree this time, but the problem has been there has not been enough support for changes to go through in previous attempts, so we’ll have to see if this one is successful.

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