Are Gambling Losses Tax Deductible

The whole tax situation with legal U.S. gambling, both online and offline, are somewhat confusing. If you have ever tried to look through the IRS's rules, then you already know the headaches and frustrations that exist. Whether or not your gambling losses are tax deductible depends on a few variables. You may or may not have to deduct your gambling losses, as the losses only matter in certain events.

If you are a gambler, either professional or amateur, you may have an opportunity to deduct your gambling losses from your taxes. As you may very well know, you do have to report all income generated from gambling past a certain limit. For the most part, only winnings of $600 or more are immediately brought in for taxing. Most casinos will not even bother unless you win more than $1,500. You will have to fill out a W2-G form for your winnings and file this with your taxes at the end of the year.

In the event that you file a W2-G, you can receive deductions from your losses. If you can collect verification that you had lost money while gambling, you will be able to deduct this amount from the taxes that would take place on your winnings. Verification includes, but is not limited to, credit records, payment slips, losing lottery tickets, statements of losses, and even losing tickets from races and similar activities. If you did not win anything, than you cannot deduct the losses.

The tax situation over online gambling is also very confusing. Since online gambling is not yet regulated in the United States, even down right illegal in some local jurisdictions, many players are wondering if gambling losses over the Internet are tax deductible. The short answer is yes. Your winnings are also taxable. Regardless of your source of income, you are supposed to report it to the IRS. Especially if you are a big winner through online gambling, you will want to fill out a gambling W-2 form in order to protect yourself from persecution by the Internal Revenue Service. Since the IRS is fairly merciless against those who evade taxes, we highly suggest that you report all of your winnings over a couple hundred dollars to the IRS.

Overall Synopsis

So that is the short of it. Gambling losses can be itemized and deducted ONLY from your gambling winnings. Remember that will you will need proof and verification in event of an audit, and the deductions will only reduce the amount of taxes you have to pay on your gambling winnings. For professional gamblers or lucky high rollers, this can be of the utmost importance when trying to spare some money from tax revenue.

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