How Do I Prove Gambling Losses On My Taxes?
Key takeaways in this article:
- Document Your Gambling: To prove gambling losses, you must maintain detailed and accurate records (including receipts, tickets, statements, and logs of wins and losses) of all your gambling activities.
- Itemize Your Deductions: Gambling losses can only be deducted if you itemize your deductions on Schedule A of Form 1040. Also, they cannot exceed your reported gambling winnings.
- What Qualifies as Gambling Losses: Losses from various forms of gambling, such as casino games, sports betting, lottery tickets, and horse racing, can be claimed, provided you have proper documentation to support said claims.
- Consult a Tax Professional: Is there any added complexity to your situation? It’d be best if you consult with a tax professional before making a move. If you’re unsure about how to document losses or calculate deductions, a tax professional can help ensure compliance with IRS rules and maximize your benefits.
- Report Losses On Time: Gambling losses must be reported on your tax return for the year in which they occurred. They cannot be carried over to future years.
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Gambling is full of thrills and excitement, at least for those who enjoy it. What it also comes with is tons of financial implications, and that includes your taxes. If you’ve incurred in any gambling losses during this tax year and want to offset them against your winnings (provided you have some of those), the IRS allows for deductions to be made on them—provided you can substantiate these losses.
Through this guide, we want to help you answer a couple of basic questions like “how do I prove gambling losses on my taxes?” and “how can I avoid the wrath of the IRS when reporting and deducting my losses?” It’s a bit of a complicated topic depending on your situation, but definitely not impossible, and the tax benefits are considerable if you do things right. Let’s dive in!
What Are Gambling Losses?
A gambling loss refers to any money that you’ve lost through “wagering”, which in turn refers to activities such as casino games (everything from slots and blackjack to poker), lottery tickets, sports betting of any kind, horse and dog racing, and raffles or sweepstakes, just to name a few.
Keep in mind that gambling losses can only be deducted to the extent of your gambling winnings, meaning that you can’t claim more money on losses than what you earned on winnings. So yeah, no luck involved in tax matters, we’re afraid.
How To Prove Your Gambling Losses
We’re not implying anything untowards about gamblers by saying this, but keep in mind that the IRS will scrutinize every minute detail of your claim when it comes to gambling losses. It’s par for the course, so make sure that you follow these recommendations if you want to avoid big problems with the house (AKA the US federal government).
1. Maintain a Gambling Log
This is less of a recommendation and more of an expectation from the IRS—keep detailed written records of all your gambling activity, which should include the following:
- The date and type of gambling activity.
- The name and location of the gambling establishment.
- The amounts won and lost.
- Names of individuals present, if applicable.
2. Keep Documentation That Supports Your Claim
Any document you can procure that supports your deduction claim you should hold onto. These include casino wins and losses statements, betting tickets or stubs, receipts from lottery or raffle purchases, and bank or credit card statements showing gambling-related transactions. Every little piece matters in case the IRS inquires further about this after submitting your tax return.
3. Use Casino Player Cards
If you’re a habitual gambler or frequently gamble at casinos, make a habit of using a player card. Most casinos track your card’s activity and can provide relevant win/lost statements upon request, which is valuable evidence in your interactions with the IRS.
4. Save Online Gambling Records
If you’re one of the millions of people in the US that gambles online, remember that you can retain your transaction history and account statements provided by the gambling platform. Ensure these documents include detailed records of deposits, wagers, and payouts.
5. Clearly Separate Your Wins and Losses
Since the IRS requires you to report all gambling winnings as income, they must be clearly separated from your losses. Losses must be claimed separately as an itemized deduction, and they cannot exceed your winnings.
Reporting Gambling Losses On Your Tax Return
As we’ve mentioned in this article, in order to report your gambling losses, you have to itemize deductions on your tax return using Schedule A. Also, if you’re not a big gambler but still want to do this, at least make sure that the combined amount of deductions from both your losses and everything else on your Schedule A will outweigh the amount you’d save by just picking the standard deduction based on your filing status.
As for your gambling winnings, these must be reported on line 8b of Form 1040 as “Other Income”, and extends to cash prizes and the fair market value of non-cash prizes, such as cars or vacations (it is true that no good air fryer goes unpunished). Also, a reminder: You can only deduct gambling losses without exceeding your winnings. If you earned less than you lost $9,000 in winning but have $12,000 in losses, you can only deduct $9,000 of those losses, and the remaining $3,000 cannot be written off or carried forward to future years.
Finally, it bears repeating that you have to include proper documentation on your return, and make sure that the attached information matches the amounts you reported on Schedule A.
Common Mistakes to Avoid When Reporting Gambling Losses
There are a few things that many taxpayers get wrong year after year when reporting their winnings and losses from gambling. Keep an eye out for these common pitfalls so you can avoid them when doing your taxes:
- Failing to Itemize Deductions: A mistake made right at the beginning of the whole thing. Taking the standard deduction means you cannot claim any gambling losses at all, no matter how well you’ve substantiated them.
- Failing to Keep Good Records: Speaking of substantiating your claims, not having enough documentation to back up your claims can lead to the IRS invalidating your deductions on gambling losses in case they choose to audit you.
- Overstating your losses: Bad move. Gambling losses cannot exceed your reported winning, as we’ve stated before. If you’ve provided enough documentation, this will be plainly obvious for the IRS, and if you didn’t provide that documentation then they will know that something is afoot. Play it safe and just make accurate and truthful deduction claims.
- Neglecting To Report Non-Cash Winnings: A win is a win even if it’s not cold, hard cash. The fair market value of non-cash prizes must be reported as income, and losses must account for these winnings as well.
The W-2G Form
We’ve spoken at length about how to use your gambling losses to offset your winnings, but let’s take a look at your winnings specifically. All gambling winnings are subject to federal income tax.
A W-2G is an official withholding document that’s issued by casinos and other gambling establishments. You won’t get one just because you got a couple of dollars from the slot machines; the W-2G will be issued to you when:
- Your horse race winnings are $600 or more (or if the win pays 300 times the wager amount).
- Your bingo/slot machine winnings exceed $1,200.
- Your keno winnings (minus the wager) exceed $1,500.
- Your poker tournament winnings exceed $5,000.
Now, if you receive multiple W-2Gs during the year, you are required to report the winnings for each in your tax return; however, even if the gambling establishment doesn’t send you a W-2G with your winnings, you are required to keep track of and report that money on your own with whatever documents you can procure, such as entry tickets and fees, wager statements, payment slips, and more.
Tax Withholding on Gambling Winnings
It’s also possible for the payer of your winnings to send you a W-2G if they withhold part of your winnings for tax purposes. The amount withheld can be found in box 4 of the form.
Speaking of tax withholding, there are two types when it comes to gambling winnings:
- Regular Withholding: The regular withholding amounts to 24% on cash payments if the winnings (minus the wager) are over $5,000. It’s 33.33% for a few non-cash winnings, including cars.
- Backup Withholding: This is also 24% (for 2024 and 2025) of the payout for bingo, keno, slot machines, and poker tournaments.
The Final Word On How To Prove Gambling Losses On Taxes
Like most things tax-related, the extent to which you can prove your gambling losses depends on your diligence when keeping records of all your gambling through the year. It’s important to save all relevant documentation in order to report accurate numbers to the IRS and avoid any unnecessary disputes.
It’s also important to at least familiarize yourself with the process of itemizing tax deductions, since this is also something that the IRS will scrutinize to make sure you’re not overreporting your losses. Keep your documentation game strong and you’ll have to face no hassles each time you want to offset your gambling winnings with your losses.
How to Prove Gambling Losses On Your Taxes: FAQ
- Can I deduct gambling losses without reporting winnings?
Absolutely not. The IRS will only allow you to deduct gambling losses if you report gambling winnings as earned income, whether you use Form W-2G or not. Losses can then be deducted up to the amount of your winnings. If the losses outweigh the winnings, the difference cannot be carried over to future years.
- What qualifies as proof of gambling losses?
There are actually quite a few documents you can use to back your claims. Acceptable proof includes a gambling log, casino win/loss statements, betting tickets, receipts, and bank statements, and your gambling history if you use a player card. These documents must clearly substantiate the amounts claimed on your tax return, otherwise you’re potentially facing an audit by the IRS.
- Can I deduct losses from all types of gambling?
Yes. Losses from casino games, sports betting, lottery tickets, raffles, and other forms of gambling are deductible, provided you have proper documentation and report winnings. It is also possible to deduct the cost of your winnings as well, such as wager costs and others. Consult a tax professional if you want to do that.
- Do I need to itemize deductions to claim gambling losses?
Yes. Gambling losses can only be claimed as an itemized deduction on Schedule A of Form 1040. If you take the standard deduction, you cannot claim gambling losses. Keep in mind that itemizing deductions is both time-consuming and labor-intensive, and you have to make sure that your savings will outweigh those of the standard deduction.
- What happens if I’m audited by the IRS about my gambling losses?
During an audit, the IRS will request proof of your gambling losses, including logs and supporting documentation. Failure to provide sufficient evidence may result in disallowed deductions and potential penalties. You will need to substantiate your every claim and have a solid enough case of an audit, so never overreport your losses and stay consistent with the documents you provide the IRS on your tax return.
- Is there a deadline for reporting gambling losses?
Gambling losses must be reported on your tax return for the year in which they occurred. As for the rest, there are no special deadlines you have to meet, since it all goes into your tax return which is due on April 15th like everything else. Ensure you have all necessary documentation before the filing deadline.
Jacob Dayan
Entrepreneur • SEO Community Tax, LLC
Jacob Dayan is the CEO and co-founder of Community Tax LLC, a leading tax resolution company known for its exceptional customer service and industry recognition. With a Bachelor’s degree in Business Administration from the University of Michigan’s Ross School of Business, Jacob began his career as a financial analyst and trader at Bear Stearns and Millennium Partners before transitioning to entrepreneurship. Since 2010, he has led Community Tax, assembling a team of skilled attorneys, CPAs, and enrolled agents to assist individuals and businesses with tax resolution, preparation, bookkeeping, and accounting. A licensed attorney in Illinois and Magna Cum Laude graduate of Mitchell Hamline School of Law, Jacob is dedicated to helping clients navigate complex financial and legal challenges.
