Record of Gambling
If you gamble, you need to keep a record of your winnings and losses for tax purposes. Gambling includes not only lotteries, but also bingo, casino gambling, raffles and pools. Record the date and type of gambling, the amount won or lost, and where you gambled. Support this record with wagering tickets, canceled checks or credit card records, and payment slips or W-2G forms for winnings.
Report Your Gambling
You are required to report all your gambling winnings. Above certain limits, the payor (the state lottery commission or the casino, for example) is required to report your winnings to the IRS. When your return is processed, IRS computers will match the income reported on your tax return with that reported by third parties. If there are discrepancies, you’ll generally be contacted by the IRS.
Winnings from gambling are taxable whether or not you receive “Form W-2G, Certain Gambling Winnings,” from the sponsor of the wager or contest. It doesn’t matter how much you win either. On your federal income tax return, all your winnings are ordinary income, taxable at your regular rate.
What about your gambling losses? They are tax-deductible – as long as you itemize. That means you’re not allowed to subtract your total losses from your total winnings and report the net amount on Line 21 of your federal Form 1040.
Instead, you claim some of your losses as an “other miscellaneous deduction” on “Schedule A, Itemized Deductions.” Why only some losses? Because the rules limit the amount you can deduct to the total of the winnings you report.
A minor consolation: Gambling losses are not subject to the 2%-of-AGI rule, so the only limitation is the amount of your winnings. Of course, you’ll also need to be able to support your total claimed losses with records such as the actual vouchers or a log book.