Last Revised on December 4, 2010
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In gambling ( such as lotteries, raffles, horse racing and casinos games), there are only two things that are possible – win and lose money. Most of the gamblers are pretty disorganized by nature, for whatever reason; and thus they are prone to losing and not keeping track of their gambling records. It is important to because at the end of the year you have to file taxes, especially if you get lucky and win tons of money. You have to claim your winning money as part of your income since gambling winning or earnings are taxable. However, if you lose money you are responsible to claim the losses that way you can earn some deductions. This is not much important for IRS, what is important to them is that you document all the money you won by gambling in your tax return accurately; otherwise you may be subject to be audited.
Lets first discuss How to claim tax deduction for gambling losses. It is pretty simple, you add all the accurate amount of money in gamble and declare that lost in Schedule A section under “Other Miscellaneous Deductions” on line 27 of 1040 tax return form and fill it out thoroughly. The only complicated part is that you have to itemize that deduction when calculating. Most of the gamblers lose more money than they win. However, if they do win more money; they can’t claim or deduct more than winning amount. It has to be either equal or less than the sum prize. Therefore, gambling losses are not subject to 2 percent limit, where only the extent of gambling winnings that exceed 2 percent of your adjusted gross income are deductible. And always be ready to be able to provide the proof of losses, which could include but not limited to log detailing the date of wagers, the location, amount bet, and the type of gaming, receipts; tickets, statements, invoices, check copies, etc. And you can’t include the expenses associated with gambling such as transportation and communication costs. Although IRS consider gamble winnings as income, the expenses are considered personal outlays unless you are a professional gamblers. The professional gamblers, like those that play in tournament to earn a living, can call gambling as a business in their taxes. So when they have out-of-pocket expenses we discussed above, they can add them under the Schedule C. This pretty much cover everything to know about how reduce your taxes with gambling losses. They call them earnings instead of winnings.
You must enter gambling winnings to be able to deduct gambling losses. So now lets move on to answer the question How Do I Pay Taxes on Gambling Winnings. I am glad you are willing to pay taxes, especially from gambles which is taxable. A lot of people assume IRS can’t catch them unless they win like a million dollar lottery prize. IRS is automatically notified by the payer whenever a gambler wins $600 or more (and that amount is 300 times your bet) at a horse track, win $1,200 at a slot machine or bingo game, or take $1,500-plus in keno winnings and $5000 at the poker tournament. This is why they get your Social Security number because it is an extra income. If you win a non-cash prize, such as a car or a trip, you will be responsible for the taxes on the fair market value of the item or items (if the value exceeds $5,000). In return for giving that information, the payer will later send you Form w-2g. It is similar to w-2 form, except w2g form will include what you won for that short time along with taxes you paid and withheld. You will find a space to fill these information in Line 21 of 1040 form. However, regardless of the amount of winnings, W2-Gs are not required for earnings from table games such as blackjack, craps, pai gow, baccarat and roulette. When you are ready to send your federal tax return, attach that w-2g form with it. When reporting the winnings, you cannot use for 1040EZ since you have to itemize the earnings and losses from gambles.
The best idea is to keep record of all the gambling transaction so that you can file pay taxes on your taxable gambling income, claim deduction on the losses and not get audited by IRS officers.
How much tax IRS charges for cash prizes? No matter what state you live in, the taxes IRS will charge you on cash prizes will depend on which tax bracket you fall into and whether or not the they deducted the taxes when you won during the contest. Usually these prizes are counted as unearned income and thus taxed along with your normal income, at 15% which is what most average people tax bracket.
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40 Responses to “How to Claim Deduction for Gambling Losses and Pay Taxes on Winnings?”
- what if you don't have the proofs? Says:
December 23rd, 2009 at 4:52 pm
Lets say I have qualify under the category to claim some tax deductions because I lost bunch of money playing lotteries and casino games but I don’t have anything to show that I did indeed lost in gambling? Also do you really have to attach the proofs with your tax return because I was thinking for filing online and just estimating the losses. Thanks in advance. Jim.
Where do I put money I won on bets? Says:
December 28th, 2009 at 6:08 pm
Ok, I hope I got this right that the money you won on bets, gambling and lotteries are all considered unearned income? Where do I put these number in my tax form. Funny but I played quite a lot of games with my money in year 2009 when the economy was falling down and many people were losing money. Good thing is that I didn’t lose instead won enough to cover the bills of my daily lives.
how much exactly do you get back on taxes for gambling losses? Says:
January 4th, 2010 at 11:06 pm
My case is hopefully very simple because I don’t have any winnings. Actually I didn’t gamble much only played poker a couple of times and lost close to $2,500 at the end of the December last year. And that’s the only time I ever spend money on such things. What I am wondering is that if there is any special formula or something to help me to estimate the deduction. Thanks.
what would be a acceptable gambling loss % Says:
January 5th, 2010 at 6:40 pm
I won $32,800 this year in the lottery. when I itemize my losses I was wondering what would be a safe amount to claim without throwing up flags to the IRS for audit? They already took out $10,000 when I claimed my prize. I did save all of my loosing receipts from playing lottery, scratch offs and raffles. I’m just deathly afraid of being audited in years down the road. thanks
January 6th, 2010 at 7:04 pm
To # 4 commentator, I would definitely add as much losses as I could into it. The good thing is you have all the receipts to prove it. If I were you, I would even opt for looking at the ones I don’t have the proofs to show because you already paid well over 30% of you winnings.
comment #4 Says:
January 7th, 2010 at 7:30 am
To Mary from comment #4, if i try to get back the $10,000 they took do you think that I might still be “safe” from audit? or should $8,000 be better, I don’t want to be to greedy. thanks Al
January 17th, 2010 at 7:57 am
I’m told by many, my losses are more than my winnings so I don’t have to pay taxes on my winnings. Last year,even though I lost more than I won, my tax man figured I owed the IRS $1,300.00 in taxes. He said if I wouldn’t have gambled, I would have gotten approx. $300 back from Federal but since I gambled, I owed them $1,300.00. How does that happen?
Thank you, in advance, for your response.
Tyson Hauer "HR Block is Only for High Income People" Says:
January 17th, 2010 at 8:49 pm
Hey Lottie, here is how I can explain this for you – you can only count as much in losses as you won. What this means is that You Have To Pay Taxes Even If You Lose More Money on Gamblings that Won. I don’t know the exact percentage number by IRS uses to calculate that taxes for this fiscal year nor do I know how much you won and lost. But the thing is the tax rates for earning/income/winnings are far more than DEDUCTIBLE rates on losses and other expenses.
January 22nd, 2010 at 9:40 pm
I play slots. My loss is always far greater than my winnings. I’m assuming it’s because my casino card shows every dollar in and out hours and hours of it. There is no way that my loss was entirely out of pocket. When putting this information on my taxes, it looks like I’ve lost a lot of money. Most people don’t understand the way it works, I don’t fully understand it. Do I have to show my entire loss on my taxes?
I hope you can help.
January 31st, 2010 at 7:30 am
I have two W2G forms which I am clear how and where to report this on the 1040 along with my losses on the 1040. However, my question is this – I won a trip. Where on the 1040 do I claim this amount and the losses as well. I did not receive a W2G because I did not receive cash.
George K Says:
January 31st, 2010 at 10:28 pm
slotsalot, your case is just very simple. You won a trip, but I would imagine they either told you how much it is worth or you could kinda estimate the amount. That fair market amount is what you put as your winning in 1040 form in Line 21. As far as losses are concerned, use the Schedule A form that comes with 1040.
February 3rd, 2010 at 7:27 pm
Why hasn’t anyone responded to my question?
Hi there, you have to definitely list all the losses to get the deduction. And you do qualify for one since your lost amount was greater than the winnings. I would recommend efile or at least a tax software and see how your tax turns out be – with these you will see how much your tax deduction, refund or return will be before submitting the completed tax return to the IRS.
February 18th, 2010 at 2:51 pm
Thank you all very much for your responses. My tax man will be here on Sunday (I think this Sunday) so I will ask him exactly how the winnings and loses are calculated. Why does the state deduct the loses before figuring the gross income and the Federal figures the winnings as “gross” income and then subtracts it at the end as loses. Very confusing to me! Oh, in year 2008 I won forty-six-thousand and lost sixty-three-thousand. This year, 2009, I won fifty-six-thousand and lost fifty-eight-thousand. I so loose more than I win and still pay taxes on my winnings. I’ll let you all know what my tax man has to say!
February 25th, 2010 at 4:54 pm
I won a tournament of $9000 and won a jackpot of $9000 last year. I have kept most of my tournament receipts. I deposited $7000 in the casino bank account and I kept track of all the money i withdraw from the account. Can the receipt of withdraw from the account be an evidence of loss? Because I used those money to play again and lost. Do I need to list every single transcation on a certain form for the IRS?
May 2nd, 2010 at 6:45 am
I have lost 10,000 since january 2010 to horse. I have don’t won. I have all of my losing tickets. How can I file yhese loses on my federal income taxes and how much will be decucted?
June 6th, 2010 at 9:01 am
Your questions about winnings and losses can’t be answered without knowing what your other income is, because this is added to your figures. Also any income you received from interest, etc. All income has to be added before you can figure what you have to pay, or what you will get as a refund. The main thing to know about gambling is that you have to claim all winnings as income, and you can only claim losses on your Schedule A..itemized deductions. You cannot claim more losses than winnings, but you can claim the same amount losses as winnings if you have the documentation to prove your figures, such as receipts, and win/loss statements from the casino.
August 15th, 2010 at 6:24 pm
Last year I won just over 3.1 million playing video poker. My net loss for the year was 14,000. My wages for the year were 100,000. My gross income 3.2 million but I did end up losing money for the year. I still had to pay several thousand dollars in income taxes even though I didn’t win anything. Why is this? Did my accountant miss something? Any help would be greatly appreciated.
Yu Tran Says:
November 21st, 2010 at 6:57 pm
So lets say, couple months ago, my mom and aunt went to casino and they won total 40,000 dollars(USD). But then, they lose all the money back
to the casino. The problem is, they have to fills the tax(i’m not really sure about this)in next 2 months, but my aunt and my mom threw aways all the proofs that they lose money(all the receipts that they had withdraw all the money from casino). And, i don’t know what can i do to help them. So, i am appreciate and thankful to u to listen to ur advice. I am sincerely to wait for u to reply my email.
Once again, i am really thank to u and appreciate that u are reading this letter. I am waiting toward to ur reply my email !
December 2nd, 2010 at 5:13 pm
I recently won a bad beat Jackpot for $43000 no taxes were taken out at the time. I have won a few smaller poker tournaments online since then for a grand total of $49000. The problem is I go to the casino often and regularly lose money playing blackjack. I have kept a little journal and all of my withdrawal receipts from the casino but I want to know if that is enough in the case that I get audited this year?
Nikkie - Loves Cash Prizes Says:
December 4th, 2010 at 8:12 pm
Yu Tran, I am not a professional tax service representative or anything but if you are having trouble figure out your winnings and losses, you should definitely seek help from someone who knows in person. Otherwise, I would try my best to collect and save all the bank records showing how much you cashed out during the time period when your aunt was losing money.
Jake, I think you are safe even if they audit you. I would make sure to keep those receipts and journal for atleast few years since IRS is slow sometimes when looking for people to audit.
Make sure to itemize your deductions guys.
December 7th, 2010 at 1:39 pm
Nikkie, Thank you. How do I go about itemizing my deductions though? I have my casino Journal, an excel sheet of all of my banking transactions with a net loss of around 30k, but I don’t know how to claim these losses or where to put them? Any help would be greatly appreciated. Also I didn’t use my players card for a few times that I was at the casino. If these losses aren’t recorded on a win/loss statement are they not valid?
January 2nd, 2011 at 10:21 pm
I have no income at all this year due to a illness. My mother plays slot machines and has won a few times this year and i have took her tax tickets will I have to pay taxes on those winnings I am not fimilar with all this and will that be considered my income for the year i dont know what to do?
February 9th, 2011 at 9:35 pm
My only income was Social Security and small FERS Annuity pension, where I only paid in small amount of Federal Withholding Taxes from the FERS. This is the first time I will file and have not worked on a Job. My Question: I requested Win/Loss Statement (received) because I have one W2G that I won for a Jackpot. I have all of my ATM slips and notated Losses, all of which were mostly Losses. My Losses roughly exceed my winnings (W2g). Will I be able to file, if I had no work income but have the W2G and did lose $$$ playing slots? Hope this makes sense.
loss winning slots Says:
February 9th, 2011 at 9:45 pm
If I won $ 50,000.00 IN SLOTS AND HAVE PROOF OF LOSSES FOR $ 75,000.00, AND i HAD SOME TAXES TAKEN OUT AT THE TIME I WON, DO I GET THAT $ BACK AND DO HAVE TO PAY ANY $ IN TAXES, IF IT’S A WASH.
February 9th, 2011 at 9:52 pm
i won a contest for a trip valued Less than $4,000
how much am i required to pay on a form #1099 i have not excepted the trip yet- i want to know what i have to pay first-please let me know Thanks! Bill
filing taxes on lottery winnings Says:
February 27th, 2011 at 6:39 pm
my nephew won money in the lottery this year but have no other income, how do he file the taxes?
Hi, you have to file tax form w2g for lottery and gambling winnings. For lottery, it goes like this: even though you have no income from employment, money you won on lottery are considered taxable income. File Form W-2G for each person to whom you pay $600 or more in gambling winnings from a sweepstakes, wagering pool, or lottery (including a state-conducted lottery) if the winnings are at least 300 times the amount of the wager. The wager must be subtracted from the total winnings to determine whether withholding is required and, at the option of the payer, to determine whether reporting is required. The wager must be subtracted at the time of the first payment. The requirements in this section apply to church raffles, charity drawings, etc. In the case of one wager for multiple raffle tickets, such as five for $1, the wager is considered as $.20 for each ticket.
For gamblings, the full amount of your gambling winnings for the year must be reported on line 21 of IRS Form 1040. You may not use Form 1040A or 1040EZ. This rule applies regardless of the amount and regardless of whether you receive a Form W-2G or any other reporting form.
File Form W-2G for each person to whom you pay $600 or more in gambling winnings from a sweepstakes, wagering pool, or lottery (including a state-conducted lottery) if the winnings are at least 300 times the amount of the wager. The wager must be subtracted from the total winnings to determine whether withholding is required and, at the option of the payer, to determine whether reporting is required. The wager must be subtracted at the time of the first payment.
Michael C Says:
March 16th, 2011 at 9:24 am
If you win a CASH 3 game, which pay $500 / ticket bought. Let say a player bought 200 tickets of the same winning number, which is bring to a total of $100K (each ticket worth $500 Cash Prize), the player decided to collect the winning from several different retailers; one ticket at a time for the next 180 days period instead of going to the lottery office in order to maintain his privacy.
By collecting 1 ticket at a time at the lottery retailers, the player will not received a W2-G at the end of the year, since each ticket claim is less than $600.
Can the player use multiple ticket stub receipts (receipt that you can request when cashing out the retailer) as a replacement to W2G when filing out his 1040?
March 31st, 2011 at 9:50 am
I downloaded a free iPhone app that I wish existed sooner. It is called WinLoss and it tracks all of your win and loss data. All you need to do is email the pdf report from the app and you get a nice printout of activity. I didn’t have it for 2010 but I am using it in 2011!
April 4th, 2011 at 11:45 am
Married and filing jointly and also in a Chapter 13 Bankruptcy, do I have to send my W-2G statement in with my tax return or can I just claim my winnings on my return? Email address is as follows: firstname.lastname@example.org
April 19th, 2011 at 7:00 pm
I do my taxes without including gambling winnings, then I also do my taxes including winnings and losses and it never comes out even. So do losses cancel out winnings or not?
You should provide all the numbers correctly (at least to the best of your knowledge). So if there is any discrepancy found by IRS, you are pretty safe.
November 29th, 2011 at 10:53 pm
Let’s say I make $40K a year and this year I have $18K worth of slot winnings. I’ve lost a bunch and didn’t use my players card everytime I’ve played because I was worried it caused me to lose. I’m not sure what the players card will say I have in winnings. The winnings seem like a lot because I play $5 slots and I have a few that are $1500, two that are $2000, and one that I won was $9000. Playing $5 slots is easy to lose. I have some ATM withdraws from the casino, but those only show $400 each. But in those days before I go to the ATM I have dropped $500 to $600 in cash before I hit the ATM. Anyways without that what would a typical person making $40K a year with $18K in winnings have to pay in taxes?
taxes on winnings Says:
January 4th, 2012 at 9:05 pm
if you win forty thousand at casino an your losses cover my winnings..i had taxes taken out when I won do i get my some of my taxes back that i paid on my winnings
taxes on winnings Says:
January 4th, 2012 at 9:07 pm
i won forty thousand at casino an had taxes taken out an also have proof of losses of forty thouand dollars..do i get the taxes back i paid since my losses covered my winnings
net loss win statement Says:
January 22nd, 2012 at 11:17 pm
In 2009 my win/loss statement was net loss 11,000.00 and win 92,000.00 I did not declare gambling monies because I thought the net loss overrode the win. Now I am being told that I owe almost 20,000.00 in taxes. Is this right?
January 27th, 2012 at 9:55 pm
I won $700 on a 50/50 raffle at a hockey game will they send me a w2g form or am I able to claim in on my taxes without a w2g form.
I am not sure if you winning needs to be reported while file taxes because according to the IRS following gambling earnings are considered reportable incomes for w-2g forms:
The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine,
The winnings (reduced by the wager) are $1,500 or more from a keno game,
The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament,
The winnings (except winnings from bingo, slot machines, keno, and poker tournaments) reduced, at the option of the payer, by the wager are:
$600 or more, and At least 300 times the amount of the wager, or
The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding).
March 17th, 2012 at 4:45 pm
The answers for IRS reporting have been given:
1) W2-G Winnings are reported as ‘Other Income’ on Line 21 of Form 1040.
2) Gambling Losses are reported on Schedule A, Line 28, Other Miscellaneous Deductions (this line is NOT subject to the 2% limitation), BUT
YOU CAN DEDUCT NO MORE THAN THE AMOUNT OF WINNINGS YOU REPORT IN INCOME (the amount you put on Line 21 of your 1040). So, if you won $15,000 and lost $75,000 doing it, it’s too bad & too sad, you can report only $15,000 as your deduction on Schedule A.
Losses need to be substantiated. You can’t just make up a number or use a percentage.
IRS will be happy to estimate your taxable income if necessary, but you have to prove your deductible expenses.
April 7th, 2012 at 11:11 am
If I win a car or cash prize in a drawing at a casino for which I earn entries by playing slot machines, can I count other gambling losses against that prize? The casino issues a W2-G for winnings on slot machines, but a 1099-MISC for the prize winning. If the prize is considered miscellaneous income rather than gambling winnings, do I have to report it separately from gambling winnings and, therefore, can’t deduct an equivalent amount of gambling losses.
April 10th, 2012 at 10:24 am
I have looked all over the web and done many searches and still confused. I have lost around 30k this year and have NEVER won before. So if I haven’t won anything (according to all the articles and information I read) does that mean I can’t claim my losses cause I have no winnings to report? PLEASE HELP. Thanks for your help in advance.
Unfortunately, I believe that’s the case right now as IRS states Gambling losses are indeed tax deductible, but only to the extent of your winnings. IRS doesn’t allow to write in gambling losses only. You cannot just deduct your losses without reporting any winnings. If the IRS allowed this, then it’s essentially subsidizing taxpayer gambling. The bottom line is that losing money at a casino or the race track does not by itself reduce your tax bill. You need to first owe tax on winnings before a loss deduction is available. Therefore, at best, deducting your losses allows you to avoid paying tax on your winnings, but nothing more. .
November 29th, 2013 at 6:43 pm
I won $9000 on 50/50, how much tax would I have to pay on it. I also have over $3200 in scratch off losses. How does that work for deductions? We will have made $60,000 this year. We haven’t claimed itemized deductions in a few years.
March 11th, 2014 at 11:29 am
Recently had my win/loss statement of -15,127.75 and total winning of 14,000. do i still owe taxes? some of them had fed and state taken out already and 4 are not. so do i still need to pay taxes. thanks in advance
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