While most miscellaneous itemized deductions cannot be taken in 2018 through 2025, those that are not subject to the 2% of adjusted gross income floor continue to be deductible. One such deduction is for gambling losses to the extent of winnings. The IRS has ruled that amounts paid to participate in daily fantasy sports, such as DraftKings and FanDuel, are wagering (Chief Counsel Advice 202042015). These activities are not merely a matter of skill; they involve something staked on an uncertain event. This means that such amounts can be deducted by those who itemize instead of taking the standard deduction. But again, they are deductible only to the extent of winnings.

To deduct gambling losses, you must substantiate them. In one case, a compulsive gambler convinced the Tax Court that he must have sustained more losses than the winnings reported to the IRS on Form W-2G (Coleman,TC Memo 2020-146). He spent most of his retirement savings and was way behind in his bills (his cell phone was shut off). Expert testimony accepted by the court said: “if a player gambles long enough and does not win any prizes that are exceptionally large relative to the size of the wager, it would be virtually impossible for that player to have annual net gambling winnings.” The court allowed him to take an itemized deduction for gambling losses equal to his gambling winnings.

Gambling losses cannot be greater than gambling wins for the tax year. Example: John wins $23,500 during the year playing slots and other casino games. His gambling losses are $37,900. John reports his $23,500 of wins on Schedule 1 and $23,500 as an itemized deduction on Schedule A. So if you had $10,000 worth of gambling winnings, you could use your $6,000 to reduce that so you only pay tax on $4,000. Similarly, if you had $5,000 of winnings and $6,000 of losses, you could only deducted the $5000 to zero out your winnings. If you don't have any winnings, you can't deduct any losses. Gambling losses are indirectly deductible on your income tax return in the state of Wisconsin. While you don’t claim them on your actual Wisconsin income tax return, you do claim them on your federal income tax return by itemizing deductions, for which you receive a credit on your Wisconsin state income tax return. The rule for claiming.

Are Gambling Losses Tax Deductible In 2018

Is Gambling Losses Tax Deductible 2018

There is one golden rule to keep in mind when deducting gambling losses on your tax return. You can’t, unfortunately, deduct losses that total more than your winnings. So, if you made $10,000 on gambling last year but lost $12,000, you can only deduct $10,000 in losses (nothing more). This can be a bit of a bummer, but don’t worry.