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To deduct gambling losses, complete Schedule M1SA, Minnesota Itemized Deductions. Include Schedule M1SA when you file Form M1, Individual Income Tax. Note: Minnesota does not allow deductions for gambling losses when calculating and paying the state Alternative Minimum Tax (AMT). Since state and federal rules differ, you may have to pay. Since the gambling losses deduction is an itemized deduction, you cannot use any other income tax form. Report the amount of your gambling losses on line 28 of your Schedule A list of itemized deductions. To enter Gambling Losses in TaxSlayer Pro from the Main Menu of the Tax Return (Form 1040), select: Itemized Deductions Menu; Other Miscellaneous Deductions; Gambling Losses to the Extent of Gambling Winnings; NOTE: This is a guide on entering Gambling Winnings and Losses into the TaxSlayer Pro program. This is not intended as tax advice. The form itself will have a number of boxes, but for purposes of preparing your tax return, boxes 1, 2 and 14 are the most important. Box 1 reports your taxable gambling winnings, box 4 reports the federal income taxes withheld and box 14 reports the amount of state income taxes withheld.

Can You Net Gambling Wins With Gambling Losses on Your Tax Return?

Taxpayers who gamble casually (meaning they do not qualify as being professional gamblers under the tax code) can net wins and losses within a single session of gambling, but not from different days. The total of multi-session wins would be reportable as “other income” on Form 1040 but the total of multi-session losses would be reported on Schedule A under “Other Itemized Deductions,” up to the amount of your winnings.

Because casinos report larger winnings to the IRS on Form W-2G, failing to use this method may cause the IRS to see a discrepancy and trigger an audit. The general IRS advice on this topic can be found on the IRS’s website (click here).

The netting ofwins and losses is addressed by the Tax Court in Shollenberger v.Commissioner, T.C. Memo. 2009-306 (2009), where the court followed IRSguidance in stating:

A key question in interpreting §165(d) is the significance of the term “transactions.” The statute refers to gains and losses in terms of wagering transactions. Some would contend that transaction means every single play in a game of chance or every wager made. Under that reading, a taxpayer would have to calculate the gain or loss on every transaction separately and treat every play or wager as a taxable event. The gambler would also have to trace and recompute the basis through all transactions to calculate the result of each play or wager. Courts considering that reading have found it unduly burdensome and unreasonable. See Green v. Commissioner, 66 T.C. 538 (1976); Szkirscak [sic] v. Commissioner, T.C. Memo. 1980-129. Moreover, the statute uses the plural term “transactions” implying that gain or loss may be calculated over a series of separate plays or wagers.

The better view is that a casual gambler, such as the taxpayer who plays the slot machines, recognizes a wagering gain or loss at the time she redeems her tokens. We think that the fluctuating wins and losses left in play are not accessions to wealth until the taxpayer redeems her tokens and can definitively calculate the amount above or below basis (the wager) realized. See Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955). For example, a casual gambler who enters a casino with $100 and redeems his or her tokens for $300 after playing the slot machines has a wagering gain of $200 ($300-$100). This is true even though the taxpayer may have had $1,000 in winning spins and $700 in losing spins during the course of play. Likewise, a casual gambler who enters a casino with $100 and loses the entire amount after playing the slot machines has a wagering loss of $100, even though the casual gambler may have had winning spins of $1,000 and losing spins of $1,100 during the course of play. [Fn. ref. omitted.]

Thus, the net win from the session as a whole (e.g., when the taxpayer actually cashes out for the day) would be reported under “other income” while the net loss from another day’s session would belong on Schedule A.

Fortunately, those who use casinos’ player cards often can get a statement from the casino breaking down daily wins and daily losses. Some casinos, however, decline to provide this level of detail to their own customers despite having such records. Instead, those casinos will provide only an annual net win or loss statement. As this may cause problems in an IRS audit if the auditor is a stickler for technicalities, a taxpayer may prefer to patronize casinos which provide the additional detail as a higher-level of customer service.

The author of this post is Daniel W. Layton, a former IRS trial attorney and ex-federal prosecutor in the Tax Division of the Los Angeles U.S. Attorney’s Office. He is a tax attorney representing private clients in Newport Beach and Fullerton, Orange County, California.

Posted on 12/11/2019 by Daniel Layton.

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Do you roll the dice? Enjoy the slot machines? Even as a casual gambler, your winnings are fully taxable and must be reported on your tax return. Learn more about how the Tax Cuts and Jobs Act impacts gambling.

There are unique considerations when it comes to disclosing gambling wins and losses on your tax return….modified recently under the Tax Cuts and Jobs Act (TCJA). If you gamble, make sure you understand the tax consequences.

First off—what counts as gambling in the eyes of the IRS?

Gambling income includes (but is not limited to)

• Winnings from
• Lotteries
• Raffles
• Horse races
• Casinos
• Cash winnings
• Fair market value of prizes (like cars and trips)

The general rules

Wins

You are required to report 100% of gambling winnings as taxable income on your 1040. In addition, all complimentary offerings provided by casinos and gambling establishments must also be included in winnings. Winnings are subject to your federal income tax rate (though rates have been reduced under the TCJA-check out our blog, 2018 Tax Reform Provisions for Individuals for more on this).

Also, if you receive a certain amount of gambling winnings or if you have any winnings that are subject to federal tax withholding, the payer must issue you a Form W-2G “Certain Gambling Winnings”.

In other words, the payer is required to issue you a W-2 G if you receive (according to the IRS).

• $1,200 or more in gambling winnings from bingo or slot machines;
• $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno (a game of chance similar to lotto);
• More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
• $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or
• Any other gambling winnings subject to federal income tax withholding.

Losses

Gambling losses can be written off as miscellaneous itemized deductions. The gambling loss deduction is limited to the extent of your winnings for the year and excess losses cannot be carried forward to future years.

Under the TCJA, misc. deductions subject to the 2% of adjusted gross income floor are not allowed, however certain deductions (including the gambling loss deduction) are still deductible.

However, since the standard deduction for 2018 was nearly doubled by the TCJA, many taxpayers may no longer benefit from itemizing, seeing as itemizing saves tax only when the total itemized deductions exceed the applicable standard deduction.

How do you claim a deduction for gambling losses?

Recordkeeping is key!

To deduct gambling losses, you must document:

1. The date and type of gambling activity
2. The name and address of the gambling establishment
3. The names of anyone who was present with you at the gambling establishment
4. The amount won or lost

**You can document gambling on table games by recording the number of the table you played and retain statements showing casino credit issued to you. As far as lotteries go, you can use winning statements and unredeemed tickets as documentation.

Key takeaway

The TCJA adds limitations to the gambling loss deduction — you can now only deduct losses up to the amount of your winnings. Any excess loss cannot offset other highly taxed income. Thus, those in the trade or business of gambling, may no longer deduct non-wagering expenses, such as travel expenses or fees, to the extent those expenses exceed gambling gains.

Tax Form For Gambling Losses

Questions? Contact us.

The TCJA…So Many Changes, So Many Questions…we can help you navigate this huge tax overhaul! Visit our Tax Reform Center for everything you and your business need to know, now.

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Tax Forms For Gambling Losses