The Basics of the

Gambling Tax Laws

Gambling winnings are taxed by both the IRS and by many states.

All winnings from all forms of gambling are taxable, and must be declared as income on your tax return.

All losses from all forms of gambling are deductible as an itemized deduction for recreational players, limited to the amount of winnings declared.

Professional gamblers should file as a self-employed business using a Schedule C.

The value of “comps” received are considered to be gaming winnings and should be included in your total winnings. This allows you to deduct gaming losses to offset the income from the “comps.”

 

Wins and losses are reported only in the year they occur. Excess losses cannot be carried forward or back to offset winnings in other years.

Married couples filling a joint return must combine their winnings and losses and report only one figure for each.

The IRS has issued instructions that “lumping” is unacceptable. “Lumping” is the practice of reporting one net win figure and no losses, or reporting nothing if your net from gambling is a loss. You must report the total of your winning sessions separately from the total of your losing sessions.

 

The IRS requires than an accurate diary or similar record must be maintained for substantiating your wins and losses, and that the diary should contain at least the following information:

The date and type of your specific wager

The name of the gaming establishment

The address or location of the gaming establishment

The names of other person(s) (if any) present with you at the gaming establishment

The amount(s) you won or lost.

The IRS also requires that in order to substantiate your diary, supplemental records are required that include the following (these records are not to be submitted with your return but …