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Collect tax breaks for gambling losses

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in Small Business Tax

Are you a casual gambler? Go ahead and enjoy yourself as long as you gamble within reason and only risk what you can afford to lose. And don’t forget about the tax consequences.

Strategy: Maintain a log of your gambling activities. This should include the type of gambling activity, the location and a statement of the amounts won and lost. Receipts, tickets, slot club statements, etc. can be used to substantiate the claims on your tax return.

The basic tax rule is that gambling losses for a year are deductible only up to the amount of your winnings for that year. You claim the deduction along with other miscellaneous expenses on Schedule A of Form 1040.

Different types of gambling activities require different types of records. Here’s the lowdown:

  • Bingo: A record of the number of games played, cost of cards purchased and amounts collected on winning cards.
  • Keno:  Copies of the keno tickets that were validated by the gambling establishment, copies of the casino credit reports and copies of the casino check-cashing records.
  • Racing (horse, harness, dog, etc.): Records of the number of races, amounts of wagers and amounts won and lost.
  • Slot machines: A record of the machine number and all winnings by date and time the machine was played.
  • Table games (e.g., blackjack, craps and roulette): The number of the table where you played and casino credit card data indicating where credit was issued.

These records may be supplemented by other items such as unredeemed tickets from the racetrack. Keep your “losers” instead of simply trashing them. But don’t try to fool the IRS by collecting torn ticket stubs littered on the ground. The IRS has enough horse sense to know a bettor wouldn’t make a slew of $2 wagers on different horses in the same race.

Tip: If you win, the jackpot is taxable, but that’s usually a price well worth paying.

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