Gambling News by Gambling Headquarters

I was talking to God the other day and I told him I knew he wanted me to win the lottery and use most of the winnings to help others (after I paid for my car and house and vacation). I told him I would buy a lottery ticket and how much I won was up to him. So I bought 20 tickets. Guess how much I won? Zero, nada! I guess he was busy with something else. So I'm out $20. Can I deduct that as a gambling loss? Today, we'll talk about that. It seems that a number of people in El Paso have consistently lost money gambling, and some of them have lost much more than their spouses know about. No surprise there, until tax season. Seems that at the end of each year the casinos send a notice to the IRS reciting how much you won -- but not how much you lost. The IRS computer checks that information when you file your return. If there is no match, you may get audited. So how do you report gambling proceeds? Let's look at these issues. This raises two questions: How much can I deduct and how do I prove it?

Unfortunately, you can deduct gambling losses only to the extent of your gambling income. You can not deduct any more than what you won. Federal tax law does not allow you to treat gambling as a business that generates losses.

This means that even if you spend all of your salary on craps, you can not deduct those losses except to offset your winnings. I think that is unfortunate. I know several people who are professional gamblers. They view it as a business, and some are quite successful and have made a great deal of money gambling. For them this rule works an injustice.

For example, if they make money in one year, they pay taxes. If they lose money the next, they can't carry back the loss against last year's gambling income -- as could a business.

Anyway, the rule is clear. Gambling losses can only offset gambling income in the same year.

How does one prove gambling losses? Under the federal tax law, we have the burden to prove the amount of these losses by maintaining proper records.

The IRS wants us to keep a diary containing information such as where and on what date we gambled, the kinds of bets we made, how much we lost, any witnesses, etc.

Further, the IRS wants us to keep documents supporting these losses, such as wagering tickets, canceled checks and credit card receipts. If you gamble out of town, the IRS likes to see airline tickets and hotel receipts.

If we don't keep good records, we will be taxed on our gross receipts -- as reported by the casino -- and not our gross income (after deducting our losses).

So there you have it. If you're going to gamble, do it for fun and entertainment and keep records. Otherwise, you get nada!