How to Deduct Gambling Losses on Your 2019 Taxes

March 27, 2020

Gamblers understand the concept of winning some, losing some. But the IRS? They prefer exact numbers. Your tax return should reflect the total game winnings of the year - from blackjack's high score to the lowest fantasy football payout. This is because you must report each stroke of luck as taxable income - big or small, friend or casino.


If you itemize your deductions, you can offset your winnings with your game losses. It may not seem very easy, but Bounds Accounting will lead you through the process from start to finish. That way, you don't leave anything on the table.


How much can I deduct from gambling losses?

You can report how much you lost in 2019, but you can't deduct more than you won. You can only do this if you are itemizing your deductions. If you take the standard deduction, you will not be able to deduct your gambling losses, but you will still need to report all of your winnings.


Where do I file this on my tax forms?

Let's say you made two trips to Vegas this year. On Trip A, you won $ 6,000 in poker. On Trip B, you lost $ 8,000. You must list each one individually. The gains as taxable income and the losses as a deduction detailed in Schedule A. In this case, you won't owe taxes on your gains because your loss is greater than your profit.


Now, let's turn those numbers around. Say on Trip A, you won $ 8,000 in poker. On Trip B, you lost $ 6,000. You will report the $ 8,000 win on your return, the $ 6,000 loss deduction in Schedule A, and will still be required to pay taxes for the remaining $ 2,000 of your earnings.


What is a W-2G? And should I have one?

A W-2G is an official withholding document usually issued by a casino or other professional gaming organization. You may receive a W-2G when your payout is issued, or you may get one in the mail. Gaming centers must issue W-2Gs by January 31. When they send yours, they also send a copy to the IRS, so don't roll the dice: report these earnings as taxable income.


Don't expect to get a W-2G for the $ 6 you earned from playing the Judge Judy slot machine. The documents are triggered by win amounts and types of games played.


Expect to receive a W-2G tax form if you win:

·     $ 1,200 or more in slots or bingo

·     $ 1,500 or more in keno

·     $ 5,000 or more in poker

·     $ 600 or more in other games, but only if the payout is at least 300 times your bet

Tip: Withholding applies only to your net winnings, which are your payment less your initial bet.


What types of records should I keep?

Keep a diary with lists, including each place you bet; the day and the hour; who was with you; and how much you bet, won, and lost. It would be best if you also kept receipts, slips, betting tickets, bank draft records, and statements of actual winnings. You can also write off the travel expenses associated with the loss, so wait for your airline ticket receipts.


Deciding to hire an accountant is the first step in appropriately managing your finances. Our team at Bounds Accounting & Tax Services, LLC, offers tax preparation and planning services for individuals, businesses, trusts, and non-profit organizations. We strive to minimize liabilities and maximize returns. If you have received an IRS or state notice, we can contact the IRS on your behalf to help resolve your tax problems. Contact us to schedule your tax preparation appointment.