Gambling winnings are fully taxable and must be reported as income on your tax return. However, you can offset those winnings by deducting your gambling losses for the year. The amount of losses you can deduct depends on a few factors.
What gambling losses are deductible?
You can deduct gambling losses if:
- You itemize deductions on Schedule A
- The losses were incurred while gambling legally
- You have records to prove the losses
Only recreational gamblers can deduct losses. If you’re a professional gambler, the rules are different—you report gambling income and losses as business income and expenses on Schedule C.
How do you record gambling losses?
You should keep an accurate diary or log of all your gambling sessions. For each session, record:
- Date and location
- Type of gambling (slots, blackjack, lottery, etc.)
- Amount you spent on gambling
- Amount you won
In addition to your log, save documentation such as casino ATM receipts, credit card statements, canceled checks, W-2Gs, and so on. These records prove the amounts you claim as losses.
What documentation do you need?
Examples of documentation that supports your gambling losses include:
- ATM receipts
- Credit card statements
- Casino chips
- Lottery tickets
- Racing tickets
- Canceled checks
If you win a payout of $600 or more from a single game, the casino or other payer must provide you with a W-2G form reporting your winnings. Make sure to keep W-2Gs as proof of losses too.
How much can you deduct in losses?
Your total deductible gambling losses are limited to the amount of your winnings for the year. You cannot deduct losses that exceed winnings.
For example, say you have $5,000 in winnings but $7,000 in losses for the year. You can only deduct $5,000, which reduces your taxable gambling income to $0.
You cannot carry excess losses forward to future years. Each year stands on its own.
Can you deduct ATM fees?
Fees for withdrawing funds from ATMs at casinos are deductible as part of your losses. Keep ATM receipts to document the fees.
Can you deduct travel expenses?
Unfortunately, you cannot deduct gambling-related travel expenses. However, if you itemize, you may be able to deduct mileage, lodging, and other travel expenses related to gambling as a miscellaneous itemized deduction. But miscellaneous deductions are limited to amounts exceeding 2% of adjusted gross income, which restricts the write-off for most taxpayers.
Can you deduct food and entertainment expenses?
No, the cost of food and entertainment while gambling is not deductible.
When are losses not deductible?
You cannot deduct gambling losses:
- For illegal gambling, such as sports betting or casino games where they are prohibited
- If you do not have records to prove them
- If you or your spouse are claimed as a dependent on someone else’s return
How are winnings and losses reported?
You must report all gambling winnings, whether or not you have losses to offset them. Winnings are reported as “Other Income” on Line 21 of Form 1040.
Losses are deducted on Schedule A as a miscellaneous itemized deduction. The amount is entered on Line 28.
Any winnings from a single slot machine or bingo game exceeding $1,200 or from keno exceeding $1,500 must be reported separately as gambling winnings. This reporting is done on Line 21 of Form 1040.
Do you have to report small winnings?
Yes, the IRS requires you to report all gambling winnings, even small amounts. Every dollar of winnings from gambling must be included in your income.
Many players receive IRS Form W-2G from casinos and other gambling operators for wins of $600 or more. But even if you do not get a W-2G, you still must report all winnings.
Do you have to report bingo, slots, and keno winnings?
Winnings from bingo and slot machines are fully taxable. If you hit a jackpot of $1,200 or more from a bingo game or slot pull, the payer will report the winnings to the IRS on Form W-2G.
For keno, a W-2G is issued when you win $1,500 or more in one game. Any amounts won under the reporting thresholds are still taxable income.
Are scratch offs taxable?
Yes, any lottery winnings, including from scratch tickets, are taxable income. Many states issue a Form W-2G for scratch-off prizes over $600. But regardless of whether you get a W-2G,scratch-off winnings must be reported.
Do you have to report gambling winnings under $600?
Yes. The W-2G threshold relates only to information reporting by the payer. As a taxpayer, you must report all gambling proceeds as income, even amounts under $600 or whatever threshold applies.
Are sweepstakes, prizes, and contests taxable?
Generally, yes. Cash and the fair market value of prizes from sweepstakes, contests, awards, raffles, etc. are considered taxable income.
Some exceptions apply for very small prizes, state lottery prizes, and certain prize pools under $5,000 where you were not required to pay to enter.
Are sports betting winnings taxable?
Winnings from legalized sports betting are fully taxable.Sportsbooks may issue a Form W-2G for very large payouts. But as with other forms of gambling, you must report all your winnings as income.
Are daily fantasy sports winnings taxable?
Yes, all winnings from daily fantasy sports sites like DraftKings and FanDuel are taxable. These sites issue Form 1099-MISC reporting annual net winnings of $600 or more.
Are gambling winnings earned as a profession taxed differently?
If your gambling activities amount to a trade or business, you are considered a professional gambler. Instead of reporting income and losses on Schedule A as an itemized deduction, you report this activity on Schedule C as business income and expenses.
Do you have to pay estimated taxes on gambling winnings?
If you have significant gambling winnings, making estimated tax payments during the year is a good idea. Otherwise, you could face penalties for owing taxes when you file your return.
Estimated taxes are generally required if you’ll owe at least $1,000 in tax after subtracting withholding and credits. Some states also have estimated tax requirements.
Can you reduce gambling winnings by directly offsetting losses?
No, you cannot simply net wins and losses together and report the net amount. You must report the full amount of all winnings as income. Losses are then deducted separately as an itemized deduction reducing your taxable income.
Are there special rules for professional gamblers?
Those who gamble as a trade or business are subject to special rules. Losses are claimed as business expenses rather than itemized deductions. Business expenses are not limited to the amount of winnings.
Business expense deductions also are not subject to the 2% AGI limit on miscellaneous deductions. And taxpayers can elect a method for calculating gains and losses – daily, per-session, or per-event basis.
Do casinos withhold taxes from winnings?
Yes, if you hit a slot or keno jackpot of $1,200 or more, the casino will withhold 25% of proceeds for federal taxes. If the win is $5,000 or more, an additional amount (up to 28%) will be withheld for state taxes if required by law.
For table games like blackjack, craps, roulette, and baccarat, withholding applies only if the win is both $600 or more AND at least 300 times the amount of your wager. In those cases, 25% federal withholding applies.
What tax form do you get for gambling winnings?
If a gambling operator withholds taxes from your winnings, they will provide you with Form W-2G detailing the amount you won and taxes withheld. Even if taxes aren’t withheld, you may receive a Form W-2G for slot, keno, and bingo winnings over certain thresholds.
In addition, sites like DraftKings and FanDuel issue Form 1099-MISC reporting daily fantasy sports winnings of $600 or more.
What if you do not receive a Form W-2G?
Even if you do not get a Form W-2G, you still must report all gambling winnings as income on your tax return. The W-2G thresholds relate only to the casino’s reporting responsibilities, not your own obligation to pay tax.
How long do you need to keep gambling records?
You should keep complete records supporting all gambling income and losses for at least 3 years from the date you filed the tax return claiming those amounts.
Having detailed records can help substantiate your gambling deductions if your return is ever audited by the IRS.
Can professional gamblers write off gambling losses?
Yes, taxpayers who gamble professionally can write off associated losses. But this is reported as a business loss rather than an itemized deduction.
Losses are entered on Line 12 of Schedule C and deducted from gambling income. With business losses, there is no limit to the deduction amount as there is for recreational gambling.
Do you have to itemize to claim gambling loss deductions?
Yes, you can only deduct gambling losses if you itemize deductions on Schedule A. You cannot take the standard deduction and still claim gambling losses.
So if your total itemized deductions – including gambling losses – do not exceed your standard deduction amount, there is no tax benefit to deducting the losses.
Can married couples deduct gambling losses separately?
In most cases, no. Married couples must combine gambling winnings and losses on a joint tax return. You cannot allocate income and deductions between spouses.
The only exception is if you and your spouse lived apart for the entire tax year. Then you can file separately and deduct losses individually.
Are there exceptions for certain low-risk forms of gambling?
Yes, the IRS makes exceptions for things like bingo at church, raffles with small prizes, and state lottery drawings. These activities may not be treated as gambling from a tax perspective.
But typical recreational casino gambling, office pools, poker games, etc. do not qualify for exceptions. Winnings from these activities are fully taxable.
Can you deduct gambling losses if you do not itemize?
No. Gambling loss deductions can only be claimed if you itemize. As an itemized deduction, gambling losses do not reduce income unless your total itemized deductions exceed the standard deduction.
Many filers are now claiming the increased standard deduction under the new tax law. So a gambling loss deduction provides no benefit if you do not itemize.
Conclusion
In summary, you can deduct gambling losses to the extent of gambling winnings for the year. However, losses are only deductible if you itemize, maintain detailed records, and follow IRS rules. Make sure to accurately report all gambling income and losses on your tax return.