If you are a professional player, you can deduct your losses as trading expenses on Schedule C without having to itemize. You can deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and keep a record of your gains and losses. The amount of losses you deduct cannot exceed the amount of gambling income you reported on your return. Claim your gambling losses up to the amount of winnings, such as Other Itemized Deductions.
However, you don't get any deductions for your losses if you don't itemize your deductions just one of the ways tax laws treat players poorly. You can include in your gambling losses the actual cost of wagering plus other expenses related to your gambling activity, including trips to and from a casino. In addition, out-of-pocket costs for transportation, meals, accommodation, etc., cannot be deducted unless you qualify as a gaming professional. The value of supplementary gifts (“gifts”) provided by gambling establishments must also be included in taxable income as winnings.
All gambling winnings are taxable income, that is, income that is subject to federal and state income taxes (except in the seven states that do not have income taxes). Michigan Gaming Control Board rules for online gaming and sports betting require platform providers, such as BetMGM or FanDuel, to provide statements to players, which must include winnings and losses. Also keep in mind that the deduction for in-game losses is limited to your winnings for the year and that any excess losses cannot be carried forward into future years. While the IRS does not have a gambling loss tax, it does allow you to deduct gambling losses on your tax return in the form of a miscellaneous deduction.
You must report all gambling winnings as Other Income on Form 1040 or 1040-SR (use Schedule 1 (Form 1040), PDF), including earnings not reported on Form W-2GPDF. Generally, non-resident aliens of the United States who are not residents of Canada cannot deduct gambling losses. According to Wolters Klower, if an individual can establish benefits from the activity for three of the last five years or if that activity is the main source of income for the full-time taxpayer, the individual may be considered to be involved in a trade or business, making it more likely that related expenses are deductible from income. In addition, Ordine, the gambling expert, noted that casual gamblers, including retirees, should understand that reporting profits can increase adjusted gross income.
You would generally itemize deductions if your gambling losses plus all other itemized expenses are greater than the standard deduction for your filing status. In fact, gambling losses are tax-deductible, but only to the extent of your winnings and requires you to report all the money you earn as taxable income on your return. The chaos of March Madness is in full swing for many sports players who relied heavily on the Big Ten regional teams to complete their draw or bet online. Luscombe noted that it is still easier for a professional player to deduct expenses, including game losses, because they can be deducted on Schedule C even if the taxpayer does not itemize deductions and does not file a Schedule A.