Can you claim gambling losses on taxes

Coleman requested a redetermination from the Tax Court regarding his gambling losses. Issues: The primary issue before the Tax Court was whether Coleman could substantiate gambling losses that offset his gambling winnings for the year. Coleman used testimony from a gaming industry expert in mathematics and slot machines to estimate the likely outcome of his gambling transactions for The expert applied established statistical techniques to how often Coleman gambled and the expected win percentages at the casinos to determine that the odds against Coleman's having any net gambling profit for the year were at least million to 1.

For taxpayers who do not gamble as their trade or business, losses from gambling transactions can be deducted as an itemized deduction to the extent of any gambling winnings. To substantiate deductions, the taxpayer must identify and keep records of each transaction and show that the transaction meets other relevant requirements. However, gamblers typically do not keep complete records of their gambling wins and losses.

As established in Cohan , 39 F. The IRS asserted that records maintained by two of the casinos showed that Coleman had net gambling winnings for Fortunately, although you must list all your winnings on your tax return, you don't have to pay tax on the full amount. You are allowed to list your annual gambling losses as an itemized deduction on Schedule A of your tax return. If you lost as much as, or more than, you won during the year, you won't have to pay any tax on your winnings.

Even if you lost more than you won, you may only deduct as much as you won during the year. However, you get no deduction for your losses at all if you don't itemize your deductions—just one of the ways gamblers are badly treated by the tax laws.

As the above rules should make clear, you must list both your total annual gambling winnings and losses on your tax return. If you're audited, your losses will be allowed by the IRS only if you can prove the amount of both your winnings and losses.

You're supposed to do this by keeping detailed records of all your gambling wins and losses during the year. This is where most gamblers slip up—they fail to keep adequate records or any records at all. As a result, y ou can end up owing taxes on winnings reported to the IRS even though your losses exceed your winnings for the year. This has happened to many gamblers who failed to keep records. He subtracted his losses from his winnings and ended up with zero; so he figured he didn't have any gambling income to list on his return.

Makes sense, doesn't it? Not to the IRS. Remos was audited by the IRS. Again, this is what to expect when you plunk down a bet at a casino, racetrack, or with some other legally operated gaming business … don't expect your buddy or the guy in accounting who's running an office pool to withhold taxes although, technically, they should.

Did you have a bad night at the blackjack table or pick the wrong horse to win? There's a silver lining if you lose a bet or two—your gambling losses might be deductible. Gambling losses include the actual cost of wagers plus related expenses, such as travel to and from a casino or other gambling establishment.

There are a couple of important catches, though. First, unless you're a professional gambler more on that in a second , you have to itemize in order to deduct gambling losses itemized deductions are claimed on Schedule A. Since the tax reform law basically doubled the standard deduction, most people aren't going to itemize anymore.

So if you claim the standard deduction, you're out of luck twice—once for losing your bet and once for not being able to deduct your gambling losses. Second, you can't deduct gambling losses that are more than the winnings you report on your return. If you were totally down on your luck and had absolutely no gambling winnings for the year, you can't deduct any of your losses. If you're a professional gambler , you can deduct your losses as business expenses on Schedule C without having to itemize.

However, a note of caution: An activity only qualifies as a business if your primary purpose is to make a profit and you're continually and regularly involved in it. Sporadic activities or hobbies don't qualify as a business. Gambling winnings and losses must be reported separately.

To help you keep track of how much you've won or lost over the course of a year, the IRS suggests keeping a diary or similar record of your gambling activities. You should also keep other items as proof of gambling winnings and losses. For example, hold on to all W-2G forms, wagering tickets, canceled checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided by casinos, racetracks, or other gambling establishments.

If you receive a W-2G form along with your gambling winnings, don't forget that the IRS is getting a copy of the form, too. So, the IRS is expecting you to claim those winnings on your tax return. If you don't, the tax man isn't going to be happy about it.

You may deduct gambling losses only if you itemize your deductions on Schedule A Form and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return. Claim your gambling losses up to the amount of winnings, as "Other Itemized Deductions. If you're a nonresident alien of the United States for income tax purposes and you have to file a tax return for U.

Nonresident Alien Income Tax Return. Refer to Publication , U.