Learn About Deducting Gambling Losses on Taxes

Understanding Gambling Losses and Tax Deductions

Gambling losses can sometimes be deducted on your federal income tax return, but only under specific circumstances and with proper documentation. The Internal Revenue Service (IRS) allows taxpayers to deduct gambling losses, but these deductions come with strict rules that differ significantly from other types of tax deductions. Understanding how gambling losses work on your taxes requires knowing the difference between casual gambling and professional gambling, as well as understanding what the IRS considers a deductible gambling loss.

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The key principle is that gambling losses are only deductible if you itemize deductions on your tax return rather than taking the standard deduction. This is an important distinction because most taxpayers take the standard deduction, which means they cannot deduct gambling losses at all. For the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your total itemized deductions, including gambling losses, do not exceed these amounts, you will be better off taking the standard deduction instead.

The IRS classifies gambling winnings as taxable income that must be reported on your tax return. According to IRS reporting requirements, gambling winnings of $1,200 or more from bingo or slot machines must be reported by the gambling establishment on Form W-2G. Winnings of $5,000 or more from other types of gambling, such as horse racing or poker tournaments, also require Form W-2G reporting. Even winnings below these thresholds should be reported as income on your tax return.

Gambling losses can only offset gambling winnings—they cannot create a loss that you carry forward to future years or use to reduce other types of income. This means if you had $5,000 in gambling winnings and $7,000 in gambling losses in the same year, you could deduct up to $5,000 in losses to offset the winnings, but the remaining $2,000 in losses cannot be used to reduce your income from employment, investments, or other sources.

Practical Takeaway: Before attempting to deduct gambling losses, determine whether you itemize deductions. If you take the standard deduction, gambling losses cannot reduce your taxable income. Gambling winnings must always be reported as income on your tax return, regardless of whether you deduct losses.

Who Can Deduct Gambling Losses and What Documentation You Need

Not every person who gambles can deduct their losses on their taxes. The IRS makes a distinction between casual gamblers and professional gamblers, and this distinction affects how you report both winnings and losses. Casual gamblers can deduct losses only as a miscellaneous itemized deduction, and only to the extent of their gambling winnings. Professional gamblers—those who gamble as their primary business or occupation—are treated differently under tax law and may be able to deduct losses differently.

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To be classified as a professional gambler by the IRS, you generally must demonstrate that you gamble with the intention of making a profit and that gambling is your primary source of income. The IRS looks at several factors, including how much time you spend gambling, whether you have a systematic approach to gambling, your track record of profits and losses over multiple years, and whether you maintain separate business records. Very few people successfully establish professional gambler status, and the burden of proof is on the taxpayer.

The most critical requirement for deducting any gambling loss is documentation. The IRS requires contemporaneous written documentation of your gambling activities and expenses. This means you should keep detailed records at the time of gambling, not reconsted after the fact. Documentation should include the type of gambling activity, the date and location of the gambling, the amount you wagered or lost, and ideally receipts or statements from the gambling establishment.

Acceptable documentation includes casino statements, betting slips, lottery tickets, receipts from gambling establishments, and statements from gambling websites or apps. Bank or credit card statements showing transfers to casinos or gambling platforms can also support your records. Some casinos issue annual statements showing your wins and losses, which can be valuable documentation. Credit card records showing purchases at casinos or gambling venues are helpful but should be supplemented with more specific gambling records.

You should keep a gambling diary or log that records each gambling session. This log should include the date, location, type of gambling, names of any companions, and the amount won or lost. Many tax professionals recommend taking photos of betting tickets or casino receipts and maintaining organized records in a folder or spreadsheet. The more detailed and contemporaneous your records, the better position you are in if the IRS questions your deduction.

Practical Takeaway: Create a record-keeping system for all gambling activities, including the date, location, type of game, and amount wagered or lost. Keep this information organized and documented at the time of gambling. Without solid documentation, the IRS will not allow you to claim gambling loss deductions.

How to Report Gambling Winnings as Income

Gambling winnings must be reported as income on your federal tax return, and the amount you report depends on the type of gambling and how much you won. This reporting requirement applies even if you did not receive a Form W-2G or if the gambling establishment did not report your winnings to the IRS. Many people mistakenly believe they only need to report winnings if they receive a form from the gambling establishment, but that is not correct. You are legally required to report all gambling income.

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When you win more than a certain amount at a casino, the casino is required to issue a Form W-2G, which reports your winnings to both you and the IRS. For slot machines and bingo, the threshold is $1,200. For keno, it is also $1,500. For horse racing, the threshold is the amount that exceeds $300 and is at least 300 times your wager. For other types of gambling, casinos must report winnings of $5,000 or more. If you win less than these thresholds, the gambling establishment typically will not issue a Form W-2G, but you still must report the winnings on your tax return.

Winnings from online gambling platforms, including online casinos, poker sites, and sports betting apps, also must be reported as income. Many of these platforms issue tax documents, but others do not. You are responsible for tracking your winnings and losses even if you do not receive official documentation. This has become increasingly important as online gambling has expanded. If you use multiple online gambling platforms, you should maintain records for each one.

If you receive a Form W-2G, the casino may withhold federal income tax from your winnings. This withholding is typically 24% for regular gambling winnings and may be higher if your winnings exceed $5,000. This withheld tax is credited against your total tax liability when you file your return. However, withholding does not eliminate your obligation to report the winnings on your tax return.

Gambling winnings should be reported on Schedule 1 (Form 1040), which is used to report additional income. The total amount should be combined with other miscellaneous income and reported on your tax return. You should also report gambling losses on Schedule A (Itemized Deductions) if you itemize rather than taking the standard deduction. The way you report these items can affect how much tax you ultimately owe.

Practical Takeaway: Report all gambling winnings on your tax return, even amounts under the Form W-2G reporting threshold. Track winnings from all sources, including casinos, online platforms, and informal betting. If you received a Form W-2G, include that information on your tax return and coordinate it with your loss deduction if you itemize.

Itemized Deductions and Gambling Loss Limitations

To deduct gambling losses on your federal tax return, you must itemize deductions rather than claim the standard deduction. Itemizing means you list out specific deductible expenses and add them together, rather than taking a flat deduction amount. For many taxpayers, itemizing does not result in a larger deduction than the standard deduction, which means gambling losses cannot be deducted even if they are otherwise deductible.

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Gambling losses are reported on Schedule A, which is the form used for itemized deductions. They appear in a section that includes miscellaneous itemized deductions that are not subject to limitations. However, gambling losses themselves are subject to a significant limitation: they can only be deducted up to the amount of your gambling winnings in the same tax year. This limitation means that gambling losses cannot