You can deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and keep a record of your gains and losses. The amount of losses you deduct cannot exceed the amount of gambling income you reported on your return. Fortunately, although you must include all your earnings on your tax return, you don't have to pay taxes on the full amount. You are allowed to include your annual gambling losses as an itemized deduction on Schedule A of your tax return.
If you lost as much or more than you earned during the year, you won't have to pay any taxes on your winnings. Even if you lost more than you earned, you can only deduct what you earned during the year. Gambling losses up to the amount of gambling winnings may be deductible if you itemize. You can claim your losses on Form 1040, Schedule A, as a miscellaneous deduction not subject to 2%.
You must keep a detailed record of your winnings and losses to justify any deductions and be able to provide receipts, tickets, statements or other records to the IRS if requested. Crippling gambling loss or debt can lead to financial problems, such as bankruptcy, legal problems or imprisonment, job loss, ill health, suicidal thoughts, and suicide attempts. So, if you have one or more earnings that exceed the reporting threshold, the IRS will know that you earned at least that amount of gambling income during the year. Now, if gaming expenses exceed gaming revenues, a professional player reports zero revenue, not a loss, said Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting.
He subtracted his losses from his winnings and ended up with zero; so he thought he didn't have any gambling income to include in his return. Compulsive gamblers often suffer from substance abuse problems, personality disorders, anxiety or depression. Like drugs and alcohol, gambling stimulates the brain's reward system, which can lead to addiction. To help you keep track of how much you have earned or lost over the course of a year, the IRS suggests keeping a diary or similar record of your gambling activities.
If you didn't have any luck and you didn't have any gambling winnings during the year, you can't deduct any of your losses. Yes, the IRS allows people who are not in the gambling business to deduct their losses as long as they itemize their deductions on Schedule A (Form 1040). For example, keep all W-2G forms, betting tickets, canceled checks, credit records, bank withdrawals, and actual earnings statements or proof of payment provided by casinos, sports betting halls, racetracks, or other gambling establishments. But taxes are relevant to gambling and that will increasingly be the case as legal gambling spreads across the country following a Supreme Court decision last year that gave states the green light to legalize and tax sports betting.
Compulsive gamblers often feel compelled to try to get their money back, which can lead to increased losses. Allows individuals to deduct gambling losses from their taxes, but only if they itemize their deductions on Schedule A (Form 1040). Depending on the circumstances, gambling income can affect a number of benefits, such as qualifying for economic impact payments or stimulus checks, and how much Social Security is taxable.