- To report any of these gambling losses, you'll be required to itemize your deductions. This makes sense if the total of all your itemized deductions exceeds the standard deduction ($12,400 for.
- The amount of gambling losses you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000, or carry it forward to future years.
The IRS views winnings from gambling as taxable income, but did you know that you're allowed to deduct gambling losses, too? While losing money at a casino or the racetrack does not by itself relieve your tax burden, it can reduce taxes owed for your other winnings, ultimately saving you money.
Note that the Tax Cuts and Jobs Act (TCJA) has suspended the regular miscellaneous expense deduction for 2018 through 2025. The TCJA also modified the gambling loss deduction, beginning in 2018. It broadened the definition of gambling losses to include other expenses incurred in gambling activities, such as a travel back and forth from a casino.
How to know if you can deduct your gambling losses
Gambling loss deductions save you money by reducing your taxable income. But there's a trick to this—you can't claim gambling losses that exceed your winnings, as losses are inextricably linked to your winnings for tax purposes. If you have no winnings to claim, you can't deduct your losses.
- To report any of these gambling losses, you'll be required to itemize your deductions. This makes sense if the total of all your itemized deductions exceeds the standard deduction ($12,400 for.
- The amount of gambling losses you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000, or carry it forward to future years.
The IRS views winnings from gambling as taxable income, but did you know that you're allowed to deduct gambling losses, too? While losing money at a casino or the racetrack does not by itself relieve your tax burden, it can reduce taxes owed for your other winnings, ultimately saving you money.
Note that the Tax Cuts and Jobs Act (TCJA) has suspended the regular miscellaneous expense deduction for 2018 through 2025. The TCJA also modified the gambling loss deduction, beginning in 2018. It broadened the definition of gambling losses to include other expenses incurred in gambling activities, such as a travel back and forth from a casino.
How to know if you can deduct your gambling losses
Gambling loss deductions save you money by reducing your taxable income. But there's a trick to this—you can't claim gambling losses that exceed your winnings, as losses are inextricably linked to your winnings for tax purposes. If you have no winnings to claim, you can't deduct your losses.
As an example, let's say that in a given year you went gambling twice, winning $6,000 in one instance, but losing $8,000 in another. In this case, you can only deduct $6,000 from that $8,000 loss. The remaining $2,000 in losses can't be carried forward or written off. Conversely, if you won more than you lost, you'd owe taxes on the difference between your winnings and losses as 'other income'—but at least those taxes would be reduced.
(If you're a full-time, professional gambler the requirements are different: you will report your earnings like they have resulted from a business, as self-employed income).
Video: How to improve your credit score without a credit card (USA TODAY)
How to claim gambling losses
Deductible gambling losses can result from online casinos, poker games, sports betting, lotteries, prize draws, horse and dog racing, and even your office fantasy sports pool. To report any of these gambling losses, you'll be required to itemize your deductions. This makes sense if the total of all your itemized deductions exceeds the standard deduction ($12,400 for taxpayers who are single or are filing separately from their spouse). If you claim the standard deduction, you don't get the opportunity to reduce taxes for winnings owed by deducting gambling losses.
Keep in mind that you must be able to substantiate any losses you're claiming, which means you'll need to keep records of your gambling.
Track your winnings and losses
You can't just say 'I lost a bunch of money gambling' to the IRS. They require you to provide records of your winnings and losses to back your claim. Therefore, you should keep track of:
- the date and time of your gambling session
- the type of gambling
- the name and location of the gambling venue
- the people you gambled with
- how much you bet, won and lost
You should also keep credit cards statements, payout slips, receipts, tickets, bank withdrawal records, and statements of actual winnings. Other documentation can include:
- Form W-2G (typically given or mailed to you by casinos after a big payout)
- Form 5754 (a form for when you're part of a group that earns money through gambling; you might see one of these if you and your co-workers are cashing in a winning lottery ticket)
Do you or someone you know need help with a gambling problem? Call the National Problem Gambling Helpline Network (1-800-522-4700).
Welcome to a new day — a day that sports betting fans will remember for the rest of their lives.
Gambling Losses Tax Deduction 2018 Federal Taxes
On May 14, 2018, the Supreme Court struck down a federal law that effectively banned commercial sports betting in most all states. As a result of overturning PASPA, each state is allowed to authorize wagering on sports. One day soon you may be able to bet that the fifth pitch in the fifth inning of a baseball game will be a strike.
You can also bet that the money you win by betting sports is considered taxable income according to the IRS.
Here's what you need to know about sports betting taxes in 2018.
An overview of taxable sports betting income
First off, gambling income is almost always taxable income. According to the IRS, gambling winners must report all of their winnings – including cash and the fair market value of any item won, such as a raffle item — on their federal income tax returns.
Casinos, as the payer of winnings, are required to withhold federal taxes from winnings above $5,000. New as part of the 2018 tax reform, that withholding rate is 24 percent, down from 25 percent in 2017. Depending on the total of your winnings, you may receive one or more Forms W-2G which reports the amount you won, including any tax withheld. All winnings reported on Form W-2G should be reported as other income on Form 1040, unless gambling is your trade or business.
Click here to get more details on Forms W-2G and 5754 for 2018.
Double down on deductions
The good news here is that you may deduct gambling losses if you plan on itemizing your deductions. But it's also worthy to note that as part of tax reform, the standard deduction nearly doubled for all taxpayers. That means it's likely that fewer taxpayers will have enough deductions to make itemizing an attractive option. According to tax law, you can only deduct your losses up to the amount of your total winnings. For example, if you won $2,000 on sports betting over the last year, you may only deduct $2,000 in losses if applicable. The same goes for any form of gambling.
If you plan on itemizing and deducting your losses, you must keep an accurate, detailed record of your wins and losses. You also need to provide sports betting tickets, receipts, or other statements that show the total of your winnings and losses. Your 'sports betting diary,' so to speak, needs to include items such as dates, the type of gambling activity, the establishment at which the bet was placed, and dollar amounts.
For any avid sports bettor, it's crucial to plan accordingly.
Professional gamblers: tax reform is here
If you pursue gambling regularly with the intention of making a profit, you are considered self-employed for tax purposes.
Under the new Tax Cuts and Jobs Act, those in the trade or business of gambling may no longer deduct non-wagering expenses, such as travel expenses or fees, to the extent those expenses exceed gambling income. Gambling losses include the actual wager and associated costs. Rather than claiming your winnings on sports betting as 'other income,' you need to file a Schedule C to report self-employment income. You can also deduct any costs of doing business on Schedule C as long as it's not more than your income. This new rule went into effect on Jan. 1, 2018.
Examples of deductions for a professional sports gambler include online or magazine subscriptions to insider content, a portion of your monthly internet costs (if you wager online), and travel expenses if you wager in-person at a casino. If you are a pro, then your gambling income is considered regular earned income and is taxed at your marginal income tax rate.
Keep in mind that TaxAct makes it simple for you to itemize and fill out the right tax forms to help ensure you maximize your deductions for the year.
Gambling Losses Tax Deduction 2018 Income Tax
Disclaimer: As a reminder, gambling addictions are a serious problem that need to be addressed as soon as possible. If you or someone you know has issues with gambling, please call 1-800-BETS OFF or seek help immediately.
Gambling Losses Tax Deduction 2018 Filing
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