How do I deduct gambling losses on my tax return?

Question

I understand that I am required to report gambling winnings and that I am allowed to deduct gambling losses. But I do I determine gambling losses? Specifically, if over the course of a year I fund an online poker account with $3,000, cash out winnings for $5,000, and have $1,000 remaining in my account, can I deduct $3,000 in losses or am I limited to $2,000 in losses?

Answer 1

Suggest that you go to irs.gov to research the answer to your question.

Answer 2

If you took out $5000 and have $1000 left, you had a total of $6000 in the account. From $3000 put in, that is a net of $3000 winnings. You can never deduct a net loss. If you itemize deductions, gambling losses are claimed on Schedule A. There are probably no special rules for online gambling because it is not legal in the US. You still have to pay taxes on illegal income though. I would just claim the $3000 net winnings on your 1040 and not bother breaking it down.

Answer 3

Your information shows no gambling loss, but rather a gain of $3,000.

If you can document other gambling losses, then, to answer your question, you put your gambling winnings on Line 21 of the 1040 and you deduct your gambling losses on the last section of Schedule A. You are allowed to deduct actual losses, up to an amount equal to your winnings. You are not allowed to net wins against losses and report the difference on Line 21.

Answer 4

If you put in a total of $3000, take out $5000 in cash, and still have $1000 in the account, that comes to a GAIN of $3000, you don't HAVE a loss. ($5000 taken out in cash, plus $1000 still in the account, minus $3000 originally put in) So you'd be reporting and paying tax on the gain. Any losses have already been taken out of your account, so if you lost a total of $3000 for example, your total gains must have been $6000 for you to still end up with the amount you mention. Sounds like the "account" is set up to get around the requirement of reporting losses only if you itemize. You probably actually need to keep records of your individual gains and losses, and report them that way rather than reporting the sums in this account - I'd call the IRS on that, or at least have your return done by a CPA (not someplace like H&R Block).

Think of it this way - if you started out with $3000 and ended up with $6000, your net gain is $3000 - you didn't just break even, with a $3000 gain and a $3000 loss. If you lost $2000, then you must have won $5000 to have ended up with $3000 more than you started with. So no matter what, you have $3000 net gain to pay taxes on.

If you don't itemize, you're not allowed to deduct losses. If you do, you can deduct losses up to the amount of the gain you are reporting for that year.

Answer 5

You are limited to the amount you won, or $2,000.