Smart tax deductions can cushion your big wins.
It happens to many people. You get swept up in the excitement of a Las Vegas vacation or a weekend away at a local casino. Maybe you’re on a cruise ship. The flashing lights of the slot machine, the Blackjack dealer’s demeanor, or the mesmerizing spin of the roulette wheel may have you spending more than you expected on gambling.
And then it happens.
You win big.
Bells sound and lights flash. Soon, it feels like nearly everyone in the casino is gathered around you, cheering. You’ve become a beacon of hope for those who haven’t win but keep trying. You collect a pile of chips and cash it in, elated.
But as you lie in bed that night, a pile of cash tucked neatly into the nightstand beside you, the thought hits: I won’t get to keep all this. The government will want their share. But how much? And how can I keep more of my winnings?
It’s best to speak with a tax accountant for the specifics of taxes on gambling winnings within your specific state and at the federal level. But the tax pros at Alleviate Tax can set your mind at ease, providing an overview of tax deductions for gambling losses.
Let’s dive in: Can you deduct casino costs or other gambling losses, such as lottery tickets, on your federal tax returns?
Declaring Gambling Wins
First, understand that you must declare all gambling winnings, whether they are from sports betting, horse races, casino games, or online gambling. You should declare winnings of any amount, whether it’s a $5 Super Bowl bet or a jackpot on a slot machine. Report gambling winnings on your 1040 Form under “other income” when you file your taxes.
Remember, earnings from gambling and games also include the fair market value of prizes you might win in a raffle or giveaway, such as a car, trip, show tickets, or electronics. Since these are “unrealized gains,” that is, you’d have to sell the product or service to receive the cash value, you’ll want to show losses, if possible, to offset the wins. That way, you can keep your new car or that 90-inch HDTV and still keep your money in your pocket.
For larger wins, the casino or gambling venue will issue an IRS Form W-2G. This is similar to a 1099 form to report income or interest earnings, but it’s used only for gambling wins.
The payer should issue a W-2G for most winnings over $600, as long as the payout is at least 300 times the original bet. Some forms of gambling have higher thresholds to report income on a W-2G. Bingo and slot machine winnings of $1,200 have to be reported. You can win up to $1,500 at keno without receiving a W-2G. And poker players can win up to $5,000 in a single tournament before receiving a W-2G.
As with a 1099 form, the payer must send you the W-2G by January 31 of the year immediately following your win. Some places, like casinos, may issue the W-2G immediately. You’ll need to share a photo ID and your tax ID number or Social Security Number.
Remember, even if you don’t receive a W-2G, you should still report all gambling and lottery wins to the IRS. That’s why you’ll want to find ways to reduce your taxable income after a big win – or any win — by deducting losses.
Withholding Taxes for Gambling Wins
If you win more than $5,000 in any single gambling event, and your win was at least 300 times what you bet, the payer (usually a casino) withholds a percentage of your winnings for federal taxes. While you might be disappointed to take home less than what you won, it’s to your benefit. This loss will be subtracted from any gambling taxes you owe. Gambling wins are added to your other income and taxed at the same tax rate. You can find a list of marginal tax rates for 2024 here.
It’s like your employer withholding federal income tax on your paycheck; if your withholdings aren’t set up correctly for the size of your household and your income, you could face a larger-than-expected tax bill in April.
Claiming Gambling Losses
The IRS is crystal clear on this rule: You can only deduct gambling losses if you itemize deductions.
Since the Tax Cuts and Jobs Act of 2017 increased the standard deduction to $14,600 for single filers, $29,200 for married, filing jointly, and $21,900 for those filing as head of household, fewer people itemize deductions. If the tax law sunsets in 2025, as it is expected to do, the standard deduction for 2026 will fall to $8,300 for individuals and $16,600 for married couples. That’s why it’s important to know how to claim your gambling losses on tax deductions, even if you plan to claim the standard deduction in 2024. If tax laws change, more people are likely to begin itemizing deductions on Schedule C again.
However, if you have a big win this year and can show gambling losses beyond the standard deduction to offset that win, you’ll want to itemize your losses on 1040 form Schedule A of your 2024 tax returns, due April 15, 2025. You can only claim gambling losses up to the amount of winnings you report. List the losses under the category “Other Itemized Deductions.”
What Gambling Losses Can You Deduct on Federal Taxes?
Now that we’ve covered what gambling wins you need to report (in short, all of them!), let’s look at what deductions you can legally take.
The list is short: You can deduct any wagers up to the amount of your winnings. That’s it. If you aren’t a professional gambler, you can’t deduct your hotel room stay in Las Vegas as a gambling loss. You can’t deduct that drink you ordered at the bar before you sat down at the slots or the all-you-can-eat buffet that kickstarted your day.
Additionally, the IRS requires that you keep a written log or diary of all your gambling wins and losses. You should also keep receipts or bank statements showing your gambling expenses.
Gambling Losses for Professional Gamblers
If you establish a business or otherwise consider yourself a professional gambler, with significant income derived from betting, you can deduct more of your gambling-related expenses. However, unlike many other businesses, where you are allowed to show a net loss and deduct that loss from your total gross income, professional gamblers can only deduct expenses up to the amount of their wins. Plus, you’ll have to pay self-employment tax on your earnings.
On the plus side, professional gamblers can deduct not just wagers, but travel to and from the betting place or casino, 50% of meals while you are gambling, and related expenses like your cell phone, internet connection, and even books you might purchase or courses you might take to learn more about your profession. Learn more about how to reduce your tax bill as an independent contractor, self-employed through allowable deductions, in this post.
Conclusion
Tax deductions can help offset earnings to reduce your overall tax bill. But it’s important to keep careful records and receipts to prove your expenses. You don’t need to submit these records to the IRS but having them on hand can provide peace of mind. In the event of an IRS audit, you’ll want to be able to show all expenses related to your earnings and tax deductions.
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Can you claim losses on casino winnings?
You can claim losses on casino winnings up to the amount of your win. If you plan to claim gambling losses on your tax returns, you should keep a log of all your wagers and also hold onto receipts or bank statements showing your expenses.
Do casinos keep track of your gambling losses?
You can request a win / loss statement from a casino, cruise ship, or other gambling establishment. However, it’s important to keep track of your own bets and wins for tax purposes. If you are going to claim gambling losses, the IRS says you should keep a log of your bets, the date, place, and other supporting documentation. It’s also a good idea to keep losing tickets or receipts showing your bets.
How do you prove gambling losses at a casino?
You can prove gambling losses at a casino through a log you maintain, documenting the amount, date, time, and place of your bet. You should also save receipts or tickets. You may be able to ask a casino for a win/loss statement as additional proof.
