Someone told me that gambling losses can be used as a tax write-off. Is this true? If so, would I just have to tell my CPA how much I lost and that’s it? I find it hard to believe since there is no receipt documentation to prove the amount lost. Maybe I will go to Vegas this year and have some fun afterall!
You can indeed write off gambling losses. However, if you are going to do so, I suggest having a journal or something and writing down your result every time you go gambling. This will keep you from guessing and will give you at least a little documentation if the IRS comes calling.
You can take a deduction for your losses only up to the amount of your winnings. That is, if you win $1,000 you can deduct $1,000 of losses. If you don’t win anything, you can’t deduct anything.
If you can only write-off losses up to the amount of winnings, I guess the only time that would be useful is if you win a large amount you have to claim, and you could write the losses to offset the taxes on the winnings. Correct? Otherwise, if I go to Vegas once and loose $2,000, can I write-off that $2,000 loss?
This is indeed the case. I have often had to claim gambling winnings on my taxes. If I were to add it up for the year I’m sure my losses would exceed the winnings,unfortunatly I can only deduct up to the amount I claim as winnings.
Here’s another detail people often overlook. You must have enough write-offs to file with itemized deductions, otherwise you eat your gambling losses. Here’s what happened to me. I won $3,000 on a Vegas slot. I have enough losses to offset that win though. I gave all the numbers to my accountant. Since I didn’t have enough deductions to file itemized, I ate my losses and had to pay taxes on the $3,000 win.
After getting burnt twice on Atlantic City slot wins, when I had to claim $900.00 as a gambling win, I searched for, and had friends save, all their loosing lottery tickets and scratch-off game cards. When I had $900.00 worth, I sent them in with my tax return.
Lesson learned…The IRS will take your word for the losses…no need to send them in. In fact, when the tickets were sent back to me, it came postage due…the bastards…
Most casinos are set up with player card systems where they can keep track of your winnings/losses and can give you a detailed statement that would be recognized by IRS if audited since it’s from a third party. It’s practically a receipt.
Good thing it was only for $900 - you might not have got by with this if the stakes were higher.
An acquaintance of a friend won the Massachussetts Megabucks about 10 years back. He gets about $60k per year for 20 years. Up until this time he hadn’t much firsthand knowledge of tax matters, and he found he didn’t much care for the deductions from his winnings.
Having heard about how you can deduct losses to the extent of winnings, he proceeded to spend a couple of weeks going to various lottery places, gathering up sacks full of losing tickets, which come tax time he presented as evidence of his losses. The tax folks said “Hey, that’s great - but where are the winning tickets?” He said there had been no winners, just a whole lot of losers. He was told that this was probably not accurate - if you buy thousands of lottery tickets, you’ll inevitably have more than a few small winners. So his claim was rejected and his taxes remained as they were.
There’s a term for this. It’s called “tax fraud.” It can get you some time in a real pound-you-in-the-ass Federal prison. Not smart.