What Qualifies as Gambling Losses Tax Deduction for IRS?

What kind of losses can a Gambler deduct on taxes?

The short answer is that most gamblers will not be able to deduct  anything on their tax returns. For the nonprofessional gambler, the IRS states that only the cost of a wagering transaction is treated as a gambling loss. Additional expenses to engage in wagering are not gambling losses. Thus, expenses for travel, meals, and lodging do not qualify as gambling losses. Unless the taxpayer is a professional gambler, these additional expenses generally are treated as nondeductible, personal expenses. These gambling expenses expenses will never be treated as hobby or business expenses.

 

IRS Form W-2G

A payer is required to issue you a Form W-2G (PDF), Certain Gambling Winnings, if you receive certain gambling winnings or if you have any gambling winnings subject to federal income tax withholding. All gambling winnings must be reported on your Form 1040(PDF) as “Other Income” (line 21), including winnings that are not subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505Tax Withholding and Estimated Tax.

Adequate documentation is required to claim gambling losses. In Rev. Proc. 77-29, the IRS stated that gamblers claiming losses must keep an accurate diary or similar record that contains at least the following information:

 

IRS Gambling Record Keeping Requirement

  • The date and type of specific wager or wagering activity.
  • The name and address or location of the gambling establishment.
  • The names of other persons (if any) present with the taxpayer at the gambling establishment.
  • The amount won or lost.

For example, wagering on table games (twenty-one, poker, roulette, etc.) may be substantiated by the number of the table played and casino credit card data indicating where credit was issued. For lotteries, a record of ticket purchases, dates, winnings and losses, as well as supplemental records such as unredeemed tickets, payment slips, and winning statements help document the activity.

 

IRS Publication on Gambling Losses

If you are considered a nonresident alien of the United States for income tax purposes and you have to file a tax return, you must use Form 1040NR. Refer to Publication 519U.S. Tax Guide for Aliens, and Publication 901U.S. Tax Treaties, for more information.