Gambling Winnings & Losses

Money and prizes won by gambling are considered income and subject to federal income tax. You have to report all of your gambling winnings on your tax return.

You may deduct your gambling losses if you itemize your deductions. However, deductible gambling losses may not be greater than the gambling income reported on your return. You should get a form named W-2G for the gambling winnings. In order to take deductions for your losses, the IRS requires you to obtain a statement from the institution with whom the losses were incurred.

Keeping track of your winnings and losses

The Internal Revenue Service requires you to keep a diary of your winnings and losses as a prerequisite to deducting losses from your winnings. This includes lotteries, raffles, horse and dog races, casino games, poker games and sports betting.
Diary must include: the date and type of gambling you engaged, the name and address of the places where you gamble, the people you gambled with and the amount you win and lose.

Form W-2G May increase your AGI (Adjusted Gross Income)

Gambling Income is taxable for both Federal and State and this can increased you adjusted gross income and that may reduce or eliminate your credits such as Child tax credit, Earned Income Credit etc. Even though the gambling loss can be deduct up to the gabling gain on the Schedule A of the Federal tax return won't help most of the tax payers. .

In Short losing money on gambling itself won't reduce your tax bill. You need to first owe tax on winnings before a loss deduction is available. Maximum loss we can claim up to the amount of gain.

If you need any more information regarding the above topic, contact me at 630-663-1500.