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However, wagering losses cannot exceed gambling winnings. Any excess gambling losses over gambling winnings cannot be carried forward or carried back to offset gambling winnings from other tax years. This is a significant benefit for the professional gambler tax return. A few common professional gambling tax deductions include.

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Today TaxMama hears from Linda in the TaxQuips Forum who wants to know. “How do I prove to the IRS that we can now net gambling losses against gambling winnings, per day, per gambling establishment, instead of deducting these losses on Sch A?

Dear Linda,

If you do your record keeping properly and consistently, you can net your gambling winnings per day – per establishment. There is nothing to prevent you from doing that, with good records.

• The rule for claiming gambling losses is that you can only claim up to the dollar amount you won gambling. If Form 1099G from the IRS shows gambling winnings of $5,000, you can claim losses of no more than $5,000, even if your losses were far greater.
• The short answer is. You can absolutely deduct those gambling losses. However, you can only do so based off of how much you’ve won in cold, hard gambling cash. This means in order to write off your losses, you will have to accurately report the amount of money you made from gambling in a given year.
• Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers.
• A gambler not in the trade or business of gambling (a 'casual gambler') can deduct wagering losses as a deduction not subject to the 2%-of-adjusted-gross-income threshold (i.e., not among miscellaneous itemized deductions the TCJA suspended for tax years 2018 through 2025) on Schedule A, Itemized Deductions, but only to the extent of the winnings.

Can You Write Off Gambling Losses 2018

However, your desire not to report your gambling losses on Schedule A? That’s out of the question. Unless you are a professional gambler, you are only permitted to report your losses on Schedule A. Worse, since gambling losses are only allowable up to your gambling winnings, once you have net your losses for the day, you cannot deduct anything, unless you have a net profit for the day.

The only way to deduct your gambling losses, or costs on Schedule C is to be a professional gambler. In other words, you make a living at gambling. That means, your gambling efforts net out at enough of a profit to live on. If you are supporting yourself with a job, or investments, or a business, or a pension, rather than your gambling winnings, you’re not a pro. Also, as a professional gambler, you must register as such with each establishment where you gamble.

Can You Write Gambling Losses Offs

This isn’t much of a gray area. These issues have been adjudicated many times. Do some research in the Tax Court archives and read the judges’ deliberations. They will help clarify the Court’s thinking and the legal process. It’s actually quite interesting.

And remember, you can find answers to all kinds of questions about gambling and other tax issues, free. Where? Where else? At www.TaxMama.com.

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It’s been a while since I’ve listed out the bad states for gamblers. Here’s an updated list. Make sure you read the notes because while all of these states have tax systems that are problematic for gamblers, some impact amateurs while others impact professionals. Note that I do not cover the laws that impact gambling here (such as Washington State’s law that makes online gambling a Class C felony).

Connecticut [1]
Hawaii [2]
Illinois [1]
Indiana [1]
Massachusetts [1]
Michigan [1]
Minnesota [3]
Mississippi [4]
New York [5]
Ohio [6]
Washington [7]
West Virginia [1]
Wisconsin [1]

NOTES:

1. CT, IL, IN, MA, MI, WV, and WI do not allow gambling losses as an itemized deduction. These states’ income taxes are written so that taxpayers pay based (generally) on their federal Adjusted Gross Income (AGI). AGI includes gambling winnings but does not include gambling losses. Thus, a taxpayer who has (say) $100,000 of gambling winnings and $100,000 of gambling losses will owe state income tax on the phantom gambling winnings. (Michigan does exempt the first $300 of gambling winnings from state income tax.)

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

3. Minnesota’s state Alternative Minimum Tax (AMT) negatively impacts amateur gamblers. Because of the design of the Minnesota AMT, amateur gamblers with significant losses effectively cannot deduct those losses.

4. Mississippi only allows Mississippi gambling losses as an itemized deduction.

5. New York has a limitation on itemized deductions. If your AGI is over $500,000, you lose 50% of your itemized deductions (including gambling losses). You begin to lose itemized deductions at an AGI of $100,000.

6. Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers.

Can You Write Off Gambling Losses On Taxes

7. Washington state has no state income tax. However, the state does have a Business & Occupations Tax (B&O Tax). The B&O Tax has not been applied toward professional gamblers, but my reading of the law says that it could be at any time.