Your Gambling Losses Might Be Deductible
Did you have a bad night at the blackjack table or pick the wrong horse to win? There’s a possible silver lining if you lose a bet or two — your gambling losses might be deductible. (Gambling losses include the actual cost of wagers plus related expenses, such as travel to and from a casino or other gambling establishment.)
There are a couple of important catches, though. First, unless you’re a professional gambler (more on that in a second), you have to itemize in order to deduct gambling losses (itemized deductions are claimed on Schedule A). Unfortunately, most people don’t itemize. So, if you claim the standard deduction, you’re out of luck twice — once for losing your bet and once for not being able to deduct your gambling losses.
Second, you can’t deduct gambling losses that are more than the winnings you report on your return. For example, if you won $100 on one bet but lost $300 on a few others, you can only deduct the first $100 of losses. If you were totally down on your luck and had absolutely no gambling winnings for the year, you can’t deduct any of your losses.
Also, according to the IRS, “to deduct your [gambling] losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.”
If you’re a professional gambler, you can deduct your losses as business expenses on Schedule C without having to itemize. However, a note of caution: An activity only qualifies as a business if your primary purpose is to make a profit and you’re continually and regularly involved in it. Sporadic activities or hobbies don’t qualify as a business.