Can You Write Off Casino Losses On Your Taxes

Gambling losses can only be applied against tax on gambling wins, so your gambling losses won't also help you write off other taxes when you file. In order to claim your losses as well as wins. Youcan't deduct more than your winnings, of course, the IRS isn't that stupid.You can't say you won $1,000 and lost $5,000, for a net loss of $4,000. If thatwas your actual experience, you could apply $1,000 of your losses towards your $1,000in winnings so you wouldn't owe any tax on your winnings. Answer: Yes, you can still deduct gambling losses to the extent of gambling winnings. The deduction of other gambling expenses will also now be limited to gambling winnings. Question: Why haven't. The IRS will only let you deduct losses to the extent that you win. For instance, if you lose $3,000 on one trip to the casino and win $2,100 on another trip in the same year, you can write off $2,100 in losses to offset the $2,100 in winnings, leaving you with a total of $900 of taxable gambling income. Gambling winnings are taxable income and are included on line 21 ('Other Income') on Form 1040. 2 Gambling losses may be deducted, but to do so, the taxpayer must itemize. The amount of gambling losses allowed is limited to the amount of gambling income received 3 (so it isn't possible to report a 'net' gambling loss).

Can you write off real money gambling losses on your taxes? The short answer is yes, but as is the case with most things that are taxes and IRS-related, it's a lot more complicated than you might think.

Gambling on the track or the tables is one thing, but one house you never want to cross is the IRS.

When it comes to gaming income and taxes, there's a lot of misinformation out there. You'll hear all kinds of funny stuff from the random characters you meet at your gaming location of choice, but you should probably treat that the same way you treat 'tips' on which slot machine is loosest tonight—with a healthy helping of skepticism.

Can You Write Off Casino Losses On Your Taxes Refund

The truth is that gaming income is very much taxable under certain conditions and up to certain amounts. And while you can definitely deduct your losses, you want to make triple sure you're doing it the right way.

I would also like to note that I am not a tax professional or tax attorney and am not giving you professional or legal advice here. I'm presenting you with some general notions of how it all works, but you should always consult a tax professional or tax attorney before filing your taxes.

Before we jump into the article, we want to make an important distinction: The rules are different if you're a professional gambler.

If You're a Professional Gambler, Read This First

Most of what you're going to read in this article concerns gambling as a hobby. The IRS basically considers a source of income a hobby if you're mostly doing it for fun. It's also considered a hobby if you're not doing it regularly or don't depend on that income to pay the bills.

There's a great list you can read about how the IRS distinguishes between a business and a hobby here.

That being said, if your main source of income is gambling, you're essentially getting taxed the same way you would if you were running your own business.

1. It means you have to pay the self-employment tax.
2. It affects the way you calculate your winnings and losses by session (which has a specific definition), which means you have to track how much you walk away with (or lose) every time you sit down and play.
3. If you're doing itemized deductions, you may be able to deduct a portion of your losses, and you may be able to deduct other expenses.

However, the best advice we can give is to work with a tax professional. Depending on your losses and expenses, you may just want to take the standard deduction.

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You Can Write off Gambling Losses but Here's the Catch

The catch is simple! You can't write off more losses than winnings.

What does that mean? Well, it means that if you're the world's biggest loser and won nothing all year but lost tens of thousands of dollars, you can't write any of it off.

If you win $5,000 and lose $20,000 for the year, you can only write off $5,000.

A lot of this depends on sessions, and the IRS recommends you keep a gaming diary or log to keep track of how much you won or lost during each session. A 'session' has a special definition, but it basically means any period of continuous play without cashing out.

So, if you sit at a blackjack table for two hours, and you're down $600 at one point, but you make a comeback and cash out up $100, even though you were down during the session, you can likely count that as $100 in winnings for that single session.

One rule though is that a session can't last more than a day.

But all of this is up for interpretation, and unless your winnings are out of control (or there's something fishy about your taxes), it's unlikely that the IRS is going to swoop down to the casino and start grilling the pit boss.

That being said, check with a tax professional if the amounts you're winning or losing are getting high. If you are winning below certain amounts, the casino doesn't have to report the income, but you still do.

If You Win Above a Certain Amount, Taxes Will Be Automatically Withheld

Even if you're really not making much money off gambling for the year, you still have to pay taxes on the income. That's right, even if you only make $100 this year by gambling, you have to report it.

That being said, once you win above a certain range, the casino (or horse track or payer) is going to withhold the taxes you owe the government.

There's a range, but it looks something like this: If you win more than $600 or 300 times whatever you wagered, the taxes will be withheld. There are special rules for some games though.

If poker is your thing, taxes won't be withheld on winnings from a poker tournament (which has a special definition) unless you win more than $5,000.

For bingo and slot machines, the limit is $1,200. If you're playing keno, it's $1,500. But even if you're not getting above these thresholds and are not automatically having your taxes withheld by the payer, your winnings are subject to a federal income-tax withholding requirement.

You have to pay 25% in taxes one way or another. All kinds of prizes can be subject to this tax. If Oprah gives you a free car at one of her shows, you're going to owe taxes on that prize.

And once you get into really big amounts, the tax rules change, so as always, consult a tax professional as soon as possible if you win big.

Adjusted Gross Income

If gambling is not your full-time job, but you're making (and/or losing) a lot of money each year, it can have a big impact on your adjusted gross income. This can increase the amount of taxes you pay each year, even if you ended up with a net loss for the year.

Your adjusted gross income is increased by any gambling wins, but gambling losses aren't going to decrease your adjusted gross income, unless you're a professional gambler (which most people aren't).

So, let's say that you had an equal amount of wins and losses for the year. Does that mean you can walk away scot-free? Definitely not. Even though your net income was low, the gross is going to be much higher.

Why does this matter? You might accidentally push yourself up into a higher tax bracket. You might be unable to get the same deductions in other areas of your life than you were once getting. You might even have to pay more in Medicare tax.

The really important takeaway here is simple. Even if you lost a whole lot of money gambling this year, you still need to report your wins and losses.

If you don't, you might find yourself in a world of tax trouble. Reach out to a tax professional, especially if you have some large winnings and losses, and see if they can save you from getting a crazy-high tax bill.

Keep Track of Wins and Losses

Remember that gambling diary or log that I mentioned earlier? If you're making enough income through gambling to owe tax on it, you need one of these. And it needs to be pretty specific about what you did and what happened during each session. Remember, a session counts as one continuous round of play without cashing out, up to one day.

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What kind of information might you keep in such a diary? You'll want to have how much you won or lost of course (net should be sufficient), but you'll also need date/time/location information, what casino game you were playing, and anything additional that can help you pinpoint each session (so you might have a machine number on there, or you might need to list the name of the people who were with you, or maybe even the pit boss). Poker nieuws.

You'll also need to keep any other proof that this money existed, like banking records (deposits and withdrawals), and a document called 'Form W-2G.'

Keep Your Eye out for Form W-2G

The house always wins, but in this case, the house is the IRS. The owners and operators of casinos and other gaming businesses have to report their income (and payments) as much as you do, so when you win over a certain amount, they may issue you Form W-2G.

Form W-2G is generally issued when you hit those minimum amounts mentioned above, but the government isn't going to give you a pass if you didn't get one. It's up to you to track that money and be aware of how much you won.

Usually, you'll know though. Form W-2G is issued because the casinos and other entities must withhold a percentage of your gambling income. If you don't receive one after a large win, make sure you ask for it so you'll have proof they withheld your taxes (and you don't end up liable for them).

Conclusion

Remember, when it comes to gambling losses and whether or not you can write them off (or whether you owe a lot more money than you thought), it's critical that you work with a tax professional. The last thing you need is to misinterpret the rules and end up with a huge tax bill on your hands.

Can You Write Off Casino Losses On Your Taxes Due

The IRS doesn't take gambling winnings lightly. Keep careful track of how much you're making, keep a diary, and contact a tax attorney or professional tax preparer before you file your taxes, especially if you made a lot of money gambling this year.

Can You Claim Casino Losses On Your Taxes

Are you a tax professional? Is there anything I missed here? Let me know in the comments!

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If you had a successful night at the slots or poker tables, you're going to have to share some of the lucky proceeds with Uncle Sam. The Internal Revenue Service generally requires that you report your gambling winnings and losses separately when you file your taxes rather than combining the two amounts.

Record Keeping

As you gamble during the year, you need to keep records of your winnings and losses so that you can support whatever figures you report on your taxes. The IRS permits you to use per-session recording, which means that instead of recording whether you won or lost each time you pull the slot machine, you can simply record your total for the session. Your records should include the date and type of gambling, where you gambled and if you gambled with anyone else, such as a home poker game. If you win more than $600, you should receive a Form W-2G from the casino.

Taxable Winnings

When figuring your gambling winnings, only include the winnings from each session rather than using losses to offset your gains. You have to include gambling winnings even if you didn't receive a Form W-2G from the casino. For example, if you gambled six times during the year, winning $100, $3,000, $4,000 and $6,000 but losing $5,000 and $2,000, your gambling winnings for the year are $13,100. This amount gets reported on line 21 of your Form 1040 tax return.

Gambling Losses

To claim your gambling losses, you have to itemize your deductions. Gambling losses are a miscellaneous deduction, but -- unlike some other miscellaneous deductions -- you can deduct the entire loss. The deduction goes on line 28 of Schedule A and you have to note that the deduction is for gambling losses. For example, if you lost $5,000 on one occasion and $7,000 on another, your total deduction is $12,000.

Gambling Loss Limitation

You can't deduct more in gambling losses than you have in gambling winnings for the year. For example, suppose you reported $13,000 in gambling winnings on Line 21 of Form 1040. Even if you lost $100,000 that year, your gambling loss deduction is limited to $13,000. Worse, you aren't allowed to carry forward the excess, so if you had $87,000 in losses you couldn't deduct last year, you can't use that to offset the gambling income from the current year.

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