Gambling losses are often a trigger for IRS audits because most people don't keep a careful record of how much they lost at the casino, racecourse, or other gambling establishment. While you are allowed to deduct gambling losses up to the amount of your winnings, doing so could lead to an audit. As the above rules must make clear, you must include your total annual gambling winnings and losses on your tax return. If you are audited, the IRS will only allow your losses if you can prove the amount of your gains and losses.
You're supposed to do this by keeping detailed records of all your in-game winnings and losses during the year. This is where most players get it wrong to keep proper records (or no records at all). As a result, you may end up owing taxes on earnings reported to the IRS even if your losses exceed your earnings for the year. Wait a minute and try again.
If you decide to deduct your in-game losses, they must be to the same extent as your winnings. The IRS can conduct an audit if it notices that you have deducted a high amount in gambling losses, but low gambling winnings. 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. Keep in mind that the IRS doesn't allow you to simply subtract your losses from your earnings and report the difference on your tax return.
And if you have a particularly unfortunate year, you can't deduct your losses without reporting any gains. If the IRS allowed it, it's basically subsidizing the taxpayer game. Canceling a loss for a hobby: You must report any income you earn from a hobby and you can deduct expenses up to the level of that income. Any deduction you make in relation to your property is subject to a three-year statute of limitations (depreciation, loss on sale, etc.) However, you won't get any deductions for your losses if you don't itemize your deductions just one of the ways tax laws treat players poorly.
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). 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. But if you are audited for something else, maybe if there is evidence that you have winnings in the game, you will be asked questions such as, “Is that all of them?” Most people, obviously, are not professional players, who are determined to be those who do it regularly as their main source of income rather than as a hobby or entertainment.
You are allowed to include your annual gambling losses as an itemized deduction on Schedule A of your tax return. In a nutshell, the government considers that gambling profits, whether from the explosion of the sports betting industry or old slot machines, poker, lotteries or anything else, are taxable to the same extent as wages. At a minimum, your records must include the dates and types of bets or specific gaming activities. He subtracted his losses from his winnings and ended up with zero; so he thought he didn't have any gambling income to include in his return.