If you’re a high roller or a wheeler-dealer and you have gambing loss expense , there’s good news for your taxes. Believe it or not, it is possible to deduct your losses from gambling from your income taxes. However, taking advantage of this tax break credit can only be done under very specific circumstances.
You Can Only Deduct Losses If You’ve Also Won Something
You must report all your gambling winnings and losses for the year to the IRS, along with documentation, which can be provided by tax forms and a gambling diary in which you keep track of wins and losses. In order to be able to deduct gambling losses, you must also be able to demonstrate income from winnings.
Your Deduction Cannot Exceed Your Winnings
In other words, the losses that you deduct must be equal or less than the amount that you’ve won in the same year. For example, if within one year you won 5000 dollars but lost 10,000 dollars, only 5000 of the 10,000-dollar loss would be tax deductible. The reason for these rules is that if you could deduct all your gambling losses without also having won something, the government would be subsidizing your gambling habit. That’s not fair to other taxpayers.
You Must Itemize Your Deductions
The IRS provides everyone a standard deduction amount. For single filers in 2017, the standard deduction was 6350 dollars. However, if your deductions exceed the amount of the standard deduction, you can itemize deductions, which basically just means making a list of them. Higher deductions mean lower taxes and possibly a refund. In order to itemize, however, the total deduction amount, including your gambling losses, has to exceed 6350 dollars.
GovDocFiling can help you in preparing and submitting tax forms to the IRS. For more information, take a look at our example tax ID number application. Or, if you’re interested in obtaining an employer identification number, see our EIN number application.