Do Not Take Tax Chances on Gambling

At the slots or online, remember to keep records.

Tax consequences of gambling

Gambling at the casino or the racetrack can be entertaining for many people. If you're one of them, you should obviously risk only what you can afford to lose from a personal financial planning perspective. But from the IRS perspective, you need to be aware of the tax consequences.

Under the tax code, you must report all gambling winnings as taxable income. You cannot claim an overall tax loss for gambling activities, but you can claim losses as an itemized deduction — up to the amount of your winnings. (Losses in excess of your winnings are not deductible.)

As you might imagine, it's important to keep accurate records.

Best advice: Keep a diary or ledger of all your gambling activities that shows the type of gambling activity, the location and the amounts won and lost.

You can support those amounts with receipts, tickets, statements or other records that substantiate your claims.

Here is a rundown of the information you need for different types of gambling activities:

Note: The same basic rules apply to online gambling. Despite a common misconception, Internet-based gambling activities aren't exempt from tax, even if the source originates overseas.

The Basics of Reporting Winnings

You generally must file a tax return and include all winnings in gross income.

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