CARL WATTS & ASSOCIATES

September 24, 2018

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Income & Losses
For Gambling

The Tax Cuts and Jobs Act did, however, modify the gambling loss deduction, beginning in 2018. For this purpose, the definition of gambling losses has been broadened to include other expenses incurred in gambling activities, such as travel back and forth from a casino or track.

Since we’ve mentioned the terms amateur and professional gamblers, let us see in a nutshell more precisely who a professional gambler is.

To be considered a professional gambler you must devote substantial time to gambling on a regular basis and you must depend on gambling winnings as a meaningful source of income. It also helps if you conduct your gambling activities in a business-like fashion by keeping detailed records of wins and losses and developing and evaluating strategies.

Professional gamblers report their gross winnings as income on Line 1 of Schedule C of Form 1040 (Profit or Loss from Business) and their losses (up to the amount of the winnings) and allowable out-of-pocket expenses (for transportation, 50% of out- of-town meal costs, lodging, and so forth) as business expenses on Schedule C. A professional gambler's allowable out-of-pocket expenses can be deducted in full on Schedule C without regard to the amount of winnings.

Under the new Tax Cuts and Jobs Act, 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 income.

Gambling losses include the actual wager and associated costs.


Rather than claiming your winnings on sports betting as “other income,” you need to file a Schedule C to report self-employment income. You can also deduct any costs of doing business on Schedule C as long as it’s not more than your income. This new rule went into effect on Jan. 1, 2018.

Examples of deductions for a professional sports gambler include online or magazine subscriptions to insider content, a portion of your monthly internet costs (if you wager online), and travel expenses if you wager in-person at a casino. If you are a pro, then your gambling income is considered regular earned income and is taxed at your marginal income tax rate.

Keep in mind that TaxAct makes it simple for you to itemize and fill out the right tax forms to help ensure you maximize your deductions for the year.

But, whether an amateur or professional gambler, you must document the amount of your losses in order to claim your rightful gambling loss deductions. According to the IRS, taxpayers must compile the following information in a log or similar record:

  • The date and type of each wager or wagering activity;

  • The name and location of the gambling establishment;

  • The names of other persons (if any) present with you at the gambling establishment (obviously this requirement cannot be met at a public venue such as a casino or race track);

  • The amount won or lost.


Be sure to keep detailed records of your gambling winnings and losses, and any related receipts, tickets, statements, or other paperwork. You must be able to prove both your winnings and losses if you wish to deduct your losses.

Obviously, help from a tax professional is always your best option in all your dealings with the IRS.
Gambling is a major international commercial activity with the legal gambling market totaling an estimated $450 billion in 2016.

Many people participate in gambling as a form of recreation and sometimes as a means to gain some income but, when it comes to income, the IRS has always some rules and regulations that apply to it. So the question is what are the tax implications for the gambling income.


Like most income, gambling winnings have to be reported on your tax return.

Gambling income includes, but is not limited to, winnings from the lottery, horse racing and casinos. It also includes cash and non-cash prizes (for instance, you must report the fair market value of non-cash prizes like cars and trips.)

If you win, the payer may give you a Form W-2G, Certain Gambling Winnings and send a copy of the W-2G to the IRS. The payer must issue the form based on the type of gambling, the amount you win and other factors. You’ll also get a form W-2G if the payer must withhold income tax from what you win.

Casinos, as the payer of winnings, are required to withhold federal taxes from winnings above $5,000.

New as part of the 2018 tax reform, is that the withholding rate is 24 percent, down from 25 percent in 2017. Depending on the total of your winnings, you may receive one or more Forms W-2G which reports the amount you won, including any tax withheld. All winnings reported on Form W-2G should be reported as other income on Form 1040, unless gambling is your trade or business.

Gambling winnings are reported on Form W-2G if:

  1. The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine,
  2. The winnings (reduced by the wager) are $1,500 or more from a keno game,
  3. The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament,
  4. The winnings (except winnings from bingo, slot machines, keno, and poker tournaments) reduced, at the option of the payer, by the wager are:

    a. $600 or more, and
    b. At least 300 times the amount of the wager, or
  5. The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding).


You normally report your winnings for the year on your tax return as “Other Income” on your 1040 Form. You must report all your gambling winnings as income, even if you don’t get a Form W-2G. In addition, you may be required to pay an estimated tax on your gambling winnings.

If you win a non-cash prize, such as a car or a trip, you will be responsible for the taxes on the fair market value of the item or

It is important to mention that you can deduct your gambling losses on Schedule A, Itemized Deductions. The total you can deduct, however, is limited to the amount of the gambling income you report on your return.

This limitation applies to the combined results from any and all types of gambling (playing the lottery, slots, poker, the horses, and all the rest.)

After applying the losses-cannot-exceed-winnings limitation, the allowable gambling loss deduction for a person who is not a professional gambler is claimed on Schedule A (Itemized Deductions). If you don't itemize, you do not get a write-off. Also, an amateur gambler cannot deduct any out-of-pocket expenses related to gambling (such as transportation costs, meals, and lodging).

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