Anyone who plays online casino games or at a live casino will have experienced losses at some stage; that’s inevitable when gambling. However, what many people don’t know is that gambling losses are deductible in certain circumstances.
So, if you’re looking for a way to write off gambling losses, then keep reading as you’ll get to grips with how to report your gambling losses and how to prove them.
When Are Gambling Losses Deductible?
You’ll be happy to hear that gambling losses are indeed deductible, but only to the extent of your winnings. Casino winnings are also taxable and you’re required to report all the money you win as taxable on your income return. If you don’t report your casino winnings, you open yourself up to summonses, penalties and other consequences.
Your winnings and losses should be separated and reported to the IRS individually. You aren’t allowed to net your wins and losses on the same day for the same type of gambling. For example, if you win at online poker one day and lose the next, you’ll have to report the money you have won as income and, from there, deduct your losses individually as an itemized deduction.
Keep in mind that there are limitations to the deductibility of your gambling losses, such as the extent of your winnings. For example, if you’ve won $5,000 but you’ve lost $8,000, you’ll only be able to put forward $5,000 of your losses as tax deductible.
How to Claim Gambling Losses
To successfully claim deductions on your losses, you have to have done your taxes right. This means that you have to itemize deductions on Schedule A (Form 1040 or 1040-SR.)
This makes it easier for the IRS to read through it. You’ll need to put your winnings under the “Other income” section, while losses up to the extent of your winnings need to be reported under “Other itemized deductions.”
Being able to prove your losses is absolutely crucial to success.
Keeping Track of Your Gambling Losses
You might be wondering how to prove gambling losses so that they are tax deductible. One of the most essential aspects of this is keeping track of your losses. It’s crucial to keep accurate records of your losses. There are a number of ways you can do this:
- A gambling log/journal: This is a good way to record all your gambling activities. Make sure you note the date, time, location and the amount you won or lost. Also, make a note of travel expenses to and from the casino, if applicable, as these can be claimed, too. Remember to note down what game you played, whether that’s casino table games like poker or blackjack, online slots, the lottery, etc.
- Save receipts: Save all of your receipts and keep them in a safe place. This means any receipts, betting slips, chips, lottery tickets, etc.
- Save bank statements: Bank statements are a great way to show withdrawals and deposits that relate to your gambling activities. They can be used to prove your losses.
- Get win/loss statements from the casino: Some casinos will provide you with win/loss statements if you request them. These are irrefutable evidence of your gambling activities.
- Screenshots and printouts of electronic records: It can be tricky to keep track of your gambling wins and losses from an app, but one of the easiest ways is simply to take a screenshot of the game you’re playing and how much you’ve won or lost. You can then print these out and keep them in a folder until you file your tax return.
- Keep track of all of your gambling expenses: It isn’t just your winnings or losses that are tax deductible from your gambling activities. You can also claim other gambling expenses, such as meals, lodging, travel costs and more. So keep receipts and records from all of these activities and submit them as some of your expenses.
- Keep your files organized: There’s no point in keeping all the above information if you’re just going to shove it into a drawer or keep it scattered around the house. The chances of them being lost without a well-structured filing system in place are very high. Ensure that you have a gambling folder or file where you keep all of your evidence. It’s a good idea to have a physical copy and an electronic copy on hand too, so scan or take a photo of physical copies or print out anything electronic.
- Consult a tax professional if you’re unsure: While it’s relatively straightforward to claim deductible expenses on your gambling activities if you aren’t sure how to correctly go about it, then it’s always best to consult a tax professional. They will be able to ensure that you successfully submit your deductions.
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