Deducting Gambling Losses

[phyrne]

Does anyone know the general rules associated with deducting gambling losses on a U.S. tax return?
Also, because internet sports gambling is illegal, does anyone have any experience with having done this and drawn some scrutiny because of it? (Unwanted scrutiny, of course!)
Anything else to pass on based on experiences or any other knowledge? Normally, I would not even think twice about it, but I had pretty significant wins and losses last year and unfrotunately ended up down on the year.

Thank you for your help.

[Joe D]

You'll need to talk with an accountant.
If you claim winnings on your W-2 you can claim up to 10% I believe in losses.

[Brian Robbins]

Reporting gambling winnings, deducting losses
By Kay Bell • Bankrate.com


Lady Luck must be Uncle Sam's cousin, because taxes must be paid on all gambling winnings.

In this tax tip: • Winning amounts matter
• When you have to report it
• Track your gaming losses

Here's a look at the federal tax forms you'll need to share your good fortune with the Internal Revenue Service. And if you lost a few rounds before your numbers came up, there's a way you can turn those losses to your tax advantage.

Winning amounts matter
Requirements for reporting and withholding from a winning bet depend on the type of gambling, the amount won and the ratio of the winnings to the wager. When you pocket $600 or more (and that amount is 300 times your bet) at a horse track, win $1,200 at a slot machine or bingo game, or take $1,500-plus in keno winnings, the payer must get your Social Security number and let the IRS know that you came into the extra income.

And if you're lucky enough to rake in $5,000 or more on a gambling transaction, you're probably not going to walk away with all the cash you won.

In addition to telling Uncle Sam that you were a winner and how much, the payer in these situations generally will reduce your payout by withholding federal taxes at the 25-percent rate. If you try to shortchange the IRS by refusing to furnish your Social Security number, the payer could take as much as 28 percent of your winnings right off the top to send to the tax collector.

In either instance, you'll get a Form W-2G showing the amount you won and, if applicable, how much in taxes you paid on it upfront.

When you have to report it
Even if you didn't win enough to trigger W-2G filing, you do want to be a diligent taxpayer and report those gambling winnings, right? The casino, track or lottery agent might not have reported that $25 you won, but it's still taxable income. It's ultimately the taxpayer's responsibility to tell Uncle Sam about his good fortune.

You report your winnings -- from the W-2G or those smaller jackpots -- on line 21, Other Income, of Form 1040. In addition to gambling proceeds, this is where you'd report any prizes or awards (cash or the cash value of merchandise) you won. All this money goes toward your total income amount.

However, you don't have to pay taxes on all your earnings, regardless of how you got them. You can reduce the amount of money the IRS will tax by reporting your losses as part of your overall itemized deductions. Check out line 27, Other Miscellaneous Deductions, on Schedule A. That's where you report any gambling losses. You can claim up to the total amount of winnings you entered on your 1040, effectively wiping out any taxable gambling income.

But make sure that this deduction, along with your other itemizations, is more than the standard amount. You always want to use the method that will provide you a bigger deduction.

Even though technically you might be able to avoid taxes on $3,000 you won by claiming $3,000 in bad bets, that's still less than the standard deduction of $5,000 allowed a single taxpayer. If you have no other deductions to itemize, it doesn't make sense to forfeit the standard deduction's other $2,000 just because you can claim gambling losses. If, however, your wagering losses are large enough to help boost your already substantial itemized deductions, then fill out the Schedule A.

Keep track of your gaming losses
When you do claim your gambling losses on your tax return, it's a good idea to keep a record of them. While you don't have to send your loss data in with your return, documentation could come in handy if the IRS ever questions the claim.

Acceptable gambling-loss recordkeeping could include a written log detailing the date of your wagers, the location, amount bet, type of gaming, and wins and losses. You should also hang on to losing lottery tickets or bingo cards.

The good thing about deducting gambling losses is that, unlike some other deductions, you don't have to meet a certain level before you can claim them. But then again, they aren't completely unlimited.

You can only count as much in losses as you won. So if you spent $100 on lottery tickets and won $75, you can only deduct $75. The other $25 is just part of the price of playing the game.

[phyrne]

Anyone think deducting losses for illegal activity will be likely to draw scrutiny?

[domafia]

If you have any fear whatsoever of getting audited by the IRS, then no you probably shouldn't deduct losses from an offshore book.

The rule of thumb is you have to have documented proof of your gambling wins/losses and the IRS won't accept illegal gambling as a part of that. So Vegas and lottery tickets = good, internet books and local bookies = bad.

[skippy]

Depends if "online" gambling is legal where you live.

I would think it is ILLEGAL where you live.

That's like saying.....I'm a drug dealer and I got ripped off for 2 kilos, therefore, I am going to claim a business loss of $200K on my taxes.

[skippy]

Originally Posted by skippy

Depends if "online" gambling is legal where you live.

I would think it is ILLEGAL where you live.

That's like saying.....I'm a drug dealer and I got ripped off for 2 kilos, therefore, I am going to claim a business loss of $200K on my taxes.

Don't laugh......There was a story about a drug dealer who had his place broken into and someone took all of his inventory. He called the police to report the crime and was subsequently arrested for dealing drugs.

[dave nz]

Originally Posted by skippy

Don't laugh......There was a story about a drug dealer who had his place broken into and someone took all of his inventory. He called the police to report the crime and was subsequently arrested for dealing drugs.

There was a lady here in NZ with a similar story recently she called Police saying she was robbed they came around found her pot crops and she was arrested.

[SecretStash]

U can only deduct from Gambling Winnings.....for example

Winning - $5000
Losses - $7500


NET BENEFIT - $0 Winngs not -$2500

[PigSkinTerror13]

they're right... you can only claim losses up to your winnings... why do you think you see old men picking up losing tickets at the track?? "sure I won a $5000 trifecta, but i lost $5000 over the year"

[skippy]

Originally Posted by PigSkinTerror13

they're right... you can only claim losses up to your winnings... why do you think you see old men picking up losing tickets at the track?? "sure I won a $5000 trifecta, but i lost $5000 over the year"

I've seen old men pick up tickets of the floor at the track, but not for that purpose.

It is rare but people do accidentally throw away a winning ticket.
One guy said he found a ticket that was worth a couple of hundred bucks.

Nowadays, all you got to do is pick up the discarded tickets and run them through the automatic tote machines. No need to use a program/form to verify a ticket.

[PigSkinTerror13]

Originally Posted by skippy

I've seen old men pick up tickets of the floor at the track, but not for that purpose.

It is rare but people do accidentally throw away a winning ticket.
One guy said he found a ticket that was worth a couple of hundred bucks.

Nowadays, all you got to do is pick up the discarded tickets and run them through the automatic tote machines. No need to use a program/form to verify a ticket.

it's a win-win situation... they get to offset winnings and possibly find a winner

[Dr. Jack]

Originally Posted by PigSkinTerror13

it's a win-win situation... they get to offset winnings and possibly find a winner

Originally Posted by skippy

I've seen old men pick up tickets of the floor at the track, but not for that purpose.

It is rare but people do accidentally throw away a winning ticket.
One guy said he found a ticket that was worth a couple of hundred bucks.

Nowadays, all you got to do is pick up the discarded tickets and run them through the automatic tote machines. No need to use a program/form to verify a ticket.

How many people toss away their winning tickets? lol

My guess is there are only losing tickets being thrown away. I would say 9999 out of every 10,000 are losing tickets. JMO

[the green monster]

I saw a story on the news where a guy was found multiple BIG winners in the trash. I want to say it was something ridiculous like a million dollar winner.

And as far as I understand the law, you can deduct losses up to 100% of your winnings. So total taxable dollars would be Zero.

[the green monster]

Also, was never really sure of this, internet gambling is Illegal in the US? Just wanted to clearify.