If you have ever lost money gambling, you might be wondering if you can deduct your gambling losses. While you can deduct up to half of your net gambling losses, you cannot deduct the full amount of your gambling losses. Gambling losses are only deductible as miscellaneous itemized deductions. They are not subject to the 2% floor for itemized deductions or the phase-out for high-income taxpayers. Here are some tips that will help you deduct your gambling losses:
If you are a professional gambler, you can claim gambling losses as a deduction if you have paid taxes on your winnings. In order to make the deduction, you must keep records of all gambling expenses, including the date and type of gambling activity, the name of the establishment, the other persons present, and the amount of money you won. Your gambling expenses can only be deducted if you have paid taxes on your gambling income. To claim a deduction, you must have the appropriate records to support your deduction.
Tax courts often cite the Cohan doctrine in cases involving gambling losses. In one case, the Tax Court found that the taxpayer’s gambling losses exceeded his reported winnings. The court also held that he had sufficiently substantiated his gambling losses. John Coleman was a compulsive gambler, but he admitted that his losses had a significant impact on his finances and his family’s lives. Though he had substantial earnings as an insurance agent, his losses reflected his problems paying multiple bills and his property taxes.
The Internal Revenue Service views gambling winnings as income, and Casual Gamblers must pay tax on their winnings. Casual Gamblers must also itemize deductions on their Schedule A. The amount of gambling losses they claim can’t exceed the total amount of gambling income they’ve reported. When calculating your taxable income, keep in mind that gambling losses are deductible only if they exceed your income. If you itemize, your gambling losses can be tax deductible as an itemized deduction.
However, it is important to keep detailed records when claiming your gambling losses. You must make sure that your clients are aware of the rules for gambling losses and that they have adequate offsetting losses to qualify for a deduction. Many clients believe they have no winnings or losses to report, but the IRS is using a powerful argument to convince them that their gambling losses are more than sufficient. So, if you have won money in a game of chance, the IRS might just find it easier to reject your claim.
Despite what you may think, the IRS has changed its rules for gambling losses. Since gambling losses were not subject to the 2% of adjusted gross income limit in the past, taxpayers can deduct up to 50% of their gambling losses. In addition, taxpayers who claim this deduction have to provide receipts, tickets, and other records that prove their gambling losses. The most important tip is to keep an accurate record. Keep track of all gambling activities, including lottery winnings and losses, poker tournaments, and sports events.
