Q Are gambling losses tax deductible? I lost nearly $7,000 last year playing slots
, but I also won a few large jackpots. One was for $10,000 and the casino gave me a form W2G for that win. SinceBasil Nestor is the author of the new Playboy Complete Guide to Casino Gambling. This wonderful book teaches players how to avoid sucker bets and win more when playing gambling games. He is also the author of The Smarter Bet Guide series for video poker, slots, craps, and many other books about gambling. Basil's website is www.smarterbet.com
I have to pay taxes on that jackpot, it would be nice if I could deduct the losses.
A Yes, gambling losses are deductible, but only when they offset gambling profits. And you MUST keep detailed records of those losses or the IRS will disallow them if you are audited. You'll need to list exactly how much you lost on a particular day at a specific machine or game (identified by machine number, game type, and casino). If you don't already have those records then you're out of luck for last year, but it's not too late to start tracking wins and losses this year.
Keep in mind that Federal taxes apply to ALL your gambling income even if a win doesn’t reach the W2G threshold for mandatory reporting by the casino to the IRS. It’s simple. You win money; you owe Uncle Sam. Jackpots between $1,200 and $5,000 are reported, but are not subject to Federal withholding when the player provides a social security number. Amounts above $5,000 require 28% withholding when the payoff is more than 300 times greater than the wager. Remember, there’s no rule that says you must limit the withholding payment to 28%. Some people wipe out their annual tax liability in one stroke by voluntarily withholding 50% or more. And you can also request withholding for jackpots under $5,000. The best course of action depends on your specific situation. Withholding is best when you don’t have offsetting gambling losses and you want to avoid a nasty surprise on April 15.