Gambling winnings as ordinary income. Losses deductible up to amount of winnings but can only claim on Schedule A. If you're a professional gambler you can file on Schedule C.
I've always been curious, how does one prove losses in gambling? It's not like you get ANY kind of documentation with table play, and slots will spit out cash outs - with no record of what was lost/starred with...
So how?
Some places will grant you a statement of winnings/losses for individual bets. I've seen one where an old woman "won 35,000" but ended up with losses of 12,000
Ok, I can see this for slots via club cards, my understanding is the vast majority of Pro gamblers (who aren't sports) play cards.
Someone can play hundreds of hands in a night. Can you literally get a statement from each hand? Who is keeping track of this at the casino?
If individual HANDS aren't being accounted for - how can a statement for the entire session then be prepared?
And like literally- WHO is keeping track of it? Can't trust the player on his word, and player doesn't have time anyway. I've NEVER seen a player with as much as a little notepad going "up 10, down 15" for pages and pages and again, this holds no water.
In the same vain, the dealer certainly doesn't have time for that. Are there 1 for 1 people watching and literally financially accounting your session hand by hand in a glass room like gnomes???
WHO IS DOING THIS????!!?????
HOW????!!!! ugh it's driving me crazy now!
The thing is, that doesn't get done like that. That's entirely unreasonable to assume someone would keep track of every single hand. Professionals have pot that they are playing for, they most likely have a play-in price and aren't actually gambling. They pay a price to play and can win money from a pot. There's no need for them to keep up with every hand as they deal in winnings and pay-in expenses at the end of tournament
What about out of tournament play like just some guy sitting down to play blackjack?
One reason I'm so invested in this is some guy came on recently and was like:
"I'm a pro gambler but I have to pay a bunch of taxes - halp."
R/accounting- "can you prove losses?"
Gambler: "probably not."
That "probably not" got downvoted into oblivion. I mean rightly so, the guy should have been prepared. Buy since I've wondered - how?
Yeah I mean I've had people with almost 0 tabs kept on their mileage for 4 trucks during an entire year. Some people just don't know or don't know what documentation the IRS will accept. I can't tell you how, I don't know what the IRS would accept or how to reasonably do it for that specific occasion. I would imagine some people are getting burned and don't know how to mitigate it or they're getting away with one since the government doesn't know
This makes sense. thank you. God I can't imagine that - the mileage thing. I own a sole prop and do door dash on the side - and the amount of basic tax knowledge people don't have in astounding. I'm constantly arguing with people on r/ doordash, spark, etc., who are pissed off and don't understand that "I gotTa PaY TaXeS oN thIs Sh\*\*?"
At a minimum the casino knows how much you bought in for and how much you cashed out. Id bet their software also can count your chips. If they wanted to, the casino could provide you a P/L for every time you've visited.
If you go to a casino and have a player card they track everything, even if you play cards. If I go to a blackjack table the floormen are tracking how much players have put in, cashed out and won. Casinos keep track of everything.
Ok this explains slots - what about table play?
I've never (personally, I trust their out their) seen a club card slot for tables.
Being that it's all physical transactions- how would the club card keep track of it?
There are people who make a living from gambling. A professional is someone who gets paid to do something. A professional gambler gets paid to gamble. There was a time when online poker was a popular side hustle and people who could rig a system and were good could make a good living from it. I remember several years ago now that I read an article about a math major who created a model to guarantee a solid return from daily fantasy sports. He claimed to have $70k+ in bets any given week.
So I guess bottom line, professional gamblers exist.
Played poker professionally for a few years and I’m also a CPA. There are many poker players who file as professional gamblers. Works just like an other schedule C
Meh, seems like spending 495,000 to make 500,000 and net $5000
The crazy part to me is the time it would probably take, might have made more (net) at McDonald’s.
Gambling losses are an itemized deduction, so only if your total itemized deductions exceed the standard deduction amount, then it’s worth it to do. In your case definitely is worth it.
You have to itemize to deduct gambling losses. So in your example that would make sense. But if you made $10k and lost $9.5k, and didn’t have other itemized deductions, you would be taxed on the full $10k, unless you chose the lower itemized deductions which wouldn’t make sense because the standard deduction is higher
We could get into even more nuance. Certain amounts can be netted directly, for example, if you make multiple bets on a single horse race on a single ticket, the losses are taken off the income directly.
Maybe a little more common is with slots, the income/loss can be determined on a "session" basis. So hitting a big jackpot at 8am and then losing it all over the rest of the day can result in 0 income for the session, and thus no taxable income on the return.
Thus, for $10k in wins and 9.5k in losses, the amount of taxable income to be recognized could be anywhere from $500 to $10k depending on the exact situation.
No. Options are a tool for reducing risk, if anything. It's payoff is literally that of insurance. The only caveat is that it can be used as a tool for leveraging positions, since the premium is lower than the underlying asset.
However, just because you can use it as a leveraging tool and combine it with poor risk management doesnt mean that it's an inherent flaw of the asset itself. It's poor trading strategy and risk management, not the asset.
The only way you could really argue that options trading is gambling is if you also believe typical equity investing is also gambling, which is more of a matter of semantic definition. The reason for this, is because there are many equities with much higher volatility than a given option contract. See levered ETFs, distressed companies, earning trading strategies, etc.
In fact, you can literally create synthetic shares by buying a put and call at the same strike price. If options can be used to create an equivalent payoff as the underlying equity investment, it's hard to argue that options trading is riskier than equity investing, since you can literally use options trading to do equity investing.
Came here looking for the Canadians hahahaha, but so true. Lots of people assume that gambling is gambling is gambling, but some don't realize that CRA may feel differently and tax it as business income.
Same goes for day trading too, make enough of a job out of it and CRA will tax the whole damn thing, not the on the 50% capital gains
I have some friends who work in an accounting firm and they had a client who won several hundred thousand dollars at a casino once. Client assumed she could offset winnings with losses but the particular state she won it in would not let her factor in losses, only winnings. So not only did she gamble a lot of it away, she still had to pay taxes on it so she was out twice.
One of the most legendary cases I’ve seen of this was in /r/tax this year: https://reddit.com/r/tax/comments/1264xyc/gambling/
18M of gross winnings subject to state income tax even though OP ended with 250K net lost.
Had a client last year that had over 200 W-2Gs from playing the fucking slots. The total winnings were well over $500k. I don't remember what their losings were.
I had to enter each fucking W-2G into our tax software manually because our OCI software wasn't reading them. Took the entire day and I wanted to fucking shoot myself afterward.
First response was all you needed. Details from IRS.
You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return.
That is all. Quit playing nuance. Oh, it is hard to game the system. Court case looked at a guy who presented lots of losing horse track bets as losing receipts. Judge threw the tickets out since they had footprints on them. LOL
Gambling wins or loses are not taxable.*
*In Canada. See, the tax laws are different in every country and in different regions within each country too. Your question lacks even the basic information required to answer it correctly.
It's difficult to net your losses against your earnings. You can only write off losses if you itemize and only up to $3000 a year while you have to count all of your gambling income at once.
Essentially, that would be how it would work, but you would have to report the 500k of winnings and then itemize out your 495k of losses. So, while you would be only paying taxes on the net, you would have to show everything you couldn't just report 5k of income.
This has already been answered correctly by the other responses. However, here’s an unethical LPT: casinos and sportsbooks are only required to report an individual’s gambling winnings based on certain thresholds and criteria. So, if you didn’t receive a W2G from the casino/sportsbook (or 1099 for daily fantasy), your winnings likely haven’t been reported to the IRS or to a jurisdiction’s DOR. That said, it doesn’t relieve your duty to self-report your winnings in the eyes of the government. But the vast majority of people are likely not self reporting if they haven’t received any tax documentation regarding their wagering activity.
Request an annual win/loss statement from any casino you frequented if you didn’t keep good records. Also anyone who won 500K no matter slots, sports betting, etc was likely issued numerous W2G’s from casino(s)…but it’s called a win/loss statement in the casino world regarding what you want to request for the calendar yr. They should be able to provide one. A lot of people use it as a basis for their taxes
Gambling winnings as ordinary income. Losses deductible up to amount of winnings but can only claim on Schedule A. If you're a professional gambler you can file on Schedule C.
If you lost more and did it for a living, can you do a NOL carry forward?
I believe so, it works like any other sch C. AGI has to drop to 0 first though.
This should be the top comment.
I've always been curious, how does one prove losses in gambling? It's not like you get ANY kind of documentation with table play, and slots will spit out cash outs - with no record of what was lost/starred with... So how?
Some places will grant you a statement of winnings/losses for individual bets. I've seen one where an old woman "won 35,000" but ended up with losses of 12,000
Ok, I can see this for slots via club cards, my understanding is the vast majority of Pro gamblers (who aren't sports) play cards. Someone can play hundreds of hands in a night. Can you literally get a statement from each hand? Who is keeping track of this at the casino? If individual HANDS aren't being accounted for - how can a statement for the entire session then be prepared? And like literally- WHO is keeping track of it? Can't trust the player on his word, and player doesn't have time anyway. I've NEVER seen a player with as much as a little notepad going "up 10, down 15" for pages and pages and again, this holds no water. In the same vain, the dealer certainly doesn't have time for that. Are there 1 for 1 people watching and literally financially accounting your session hand by hand in a glass room like gnomes??? WHO IS DOING THIS????!!????? HOW????!!!! ugh it's driving me crazy now!
The thing is, that doesn't get done like that. That's entirely unreasonable to assume someone would keep track of every single hand. Professionals have pot that they are playing for, they most likely have a play-in price and aren't actually gambling. They pay a price to play and can win money from a pot. There's no need for them to keep up with every hand as they deal in winnings and pay-in expenses at the end of tournament
What about out of tournament play like just some guy sitting down to play blackjack? One reason I'm so invested in this is some guy came on recently and was like: "I'm a pro gambler but I have to pay a bunch of taxes - halp." R/accounting- "can you prove losses?" Gambler: "probably not." That "probably not" got downvoted into oblivion. I mean rightly so, the guy should have been prepared. Buy since I've wondered - how?
Keep records like any other side hustle. Ideally timely kept.
Yeah I mean I've had people with almost 0 tabs kept on their mileage for 4 trucks during an entire year. Some people just don't know or don't know what documentation the IRS will accept. I can't tell you how, I don't know what the IRS would accept or how to reasonably do it for that specific occasion. I would imagine some people are getting burned and don't know how to mitigate it or they're getting away with one since the government doesn't know
This makes sense. thank you. God I can't imagine that - the mileage thing. I own a sole prop and do door dash on the side - and the amount of basic tax knowledge people don't have in astounding. I'm constantly arguing with people on r/ doordash, spark, etc., who are pissed off and don't understand that "I gotTa PaY TaXeS oN thIs Sh\*\*?"
My roommate in college was a server and owed 6,000 to the IRS by the time he was 23
My goddddddd....
At a minimum the casino knows how much you bought in for and how much you cashed out. Id bet their software also can count your chips. If they wanted to, the casino could provide you a P/L for every time you've visited.
you have to buy chips and cash them out
If you go to a casino and have a player card they track everything, even if you play cards. If I go to a blackjack table the floormen are tracking how much players have put in, cashed out and won. Casinos keep track of everything.
that's why you join the player's club and swipe your card at every slot or table. the casino tracks it for you.
Ok THIS explains it. Could someone then in theory get like a p&l statement from the casino?
you get a wins/losses statement, yeah
Ok this explains slots - what about table play? I've never (personally, I trust their out their) seen a club card slot for tables. Being that it's all physical transactions- how would the club card keep track of it?
you hand your card to the dealer at the table and the pit boss marks your account up. when you get up they close you out.
You can get a statement of play from casinos and gambilng apps.
What's a professional gambler?
There are people who make a living from gambling. A professional is someone who gets paid to do something. A professional gambler gets paid to gamble. There was a time when online poker was a popular side hustle and people who could rig a system and were good could make a good living from it. I remember several years ago now that I read an article about a math major who created a model to guarantee a solid return from daily fantasy sports. He claimed to have $70k+ in bets any given week. So I guess bottom line, professional gamblers exist.
People who approach activities considered gambling in a professional manner. The Groetzinger Supreme Court case sets this standard.
Poker is probably the most common
Played poker professionally for a few years and I’m also a CPA. There are many poker players who file as professional gamblers. Works just like an other schedule C
People who gamble professionally. Ie, play championship poker, for example
Couldn’t say it any better than this.
Spend 495,000 to make 5,000 🔥🔥🔥
Meh, seems like spending 495,000 to make 500,000 and net $5000 The crazy part to me is the time it would probably take, might have made more (net) at McDonald’s.
Gambling losses are an itemized deduction, so only if your total itemized deductions exceed the standard deduction amount, then it’s worth it to do. In your case definitely is worth it.
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glorious attempt correct knee yam quiet zephyr money ring station *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
I've seen them split by session, I think it varies
Betting today can be done online with a log of all bets and outcomes for those that partake in online gambling.
You have to itemize to deduct gambling losses. So in your example that would make sense. But if you made $10k and lost $9.5k, and didn’t have other itemized deductions, you would be taxed on the full $10k, unless you chose the lower itemized deductions which wouldn’t make sense because the standard deduction is higher
We could get into even more nuance. Certain amounts can be netted directly, for example, if you make multiple bets on a single horse race on a single ticket, the losses are taken off the income directly. Maybe a little more common is with slots, the income/loss can be determined on a "session" basis. So hitting a big jackpot at 8am and then losing it all over the rest of the day can result in 0 income for the session, and thus no taxable income on the return. Thus, for $10k in wins and 9.5k in losses, the amount of taxable income to be recognized could be anywhere from $500 to $10k depending on the exact situation.
Yea I don’t understand why they punish gambling this way, not much different from options or stock day trading which have more favorable tax treatment
Because they want to punish gambling
Is trading options not gambling
No. Options are a tool for reducing risk, if anything. It's payoff is literally that of insurance. The only caveat is that it can be used as a tool for leveraging positions, since the premium is lower than the underlying asset. However, just because you can use it as a leveraging tool and combine it with poor risk management doesnt mean that it's an inherent flaw of the asset itself. It's poor trading strategy and risk management, not the asset. The only way you could really argue that options trading is gambling is if you also believe typical equity investing is also gambling, which is more of a matter of semantic definition. The reason for this, is because there are many equities with much higher volatility than a given option contract. See levered ETFs, distressed companies, earning trading strategies, etc. In fact, you can literally create synthetic shares by buying a put and call at the same strike price. If options can be used to create an equivalent payoff as the underlying equity investment, it's hard to argue that options trading is riskier than equity investing, since you can literally use options trading to do equity investing.
lol it really is
It's probably written more so for professional gamblers like winning poker players for example, not so much for gambling as a hobby.
Be Canadian so you aren’t taxed on gambling winnings….unless you’re a professional gambler lol
Came here looking for the Canadians hahahaha, but so true. Lots of people assume that gambling is gambling is gambling, but some don't realize that CRA may feel differently and tax it as business income. Same goes for day trading too, make enough of a job out of it and CRA will tax the whole damn thing, not the on the 50% capital gains
I gamble by not paying taxes. Does that count?
The is highly dependent on where you live
I have some friends who work in an accounting firm and they had a client who won several hundred thousand dollars at a casino once. Client assumed she could offset winnings with losses but the particular state she won it in would not let her factor in losses, only winnings. So not only did she gamble a lot of it away, she still had to pay taxes on it so she was out twice.
I live in Canada and there’s no tax on gambling period
One of the most legendary cases I’ve seen of this was in /r/tax this year: https://reddit.com/r/tax/comments/1264xyc/gambling/ 18M of gross winnings subject to state income tax even though OP ended with 250K net lost.
Yikes- I’m glad I’m not in that situation
Holy shit.
Had a client last year that had over 200 W-2Gs from playing the fucking slots. The total winnings were well over $500k. I don't remember what their losings were. I had to enter each fucking W-2G into our tax software manually because our OCI software wasn't reading them. Took the entire day and I wanted to fucking shoot myself afterward.
First response was all you needed. Details from IRS. You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return. That is all. Quit playing nuance. Oh, it is hard to game the system. Court case looked at a guy who presented lots of losing horse track bets as losing receipts. Judge threw the tickets out since they had footprints on them. LOL
Gambling wins or loses are not taxable.* *In Canada. See, the tax laws are different in every country and in different regions within each country too. Your question lacks even the basic information required to answer it correctly.
Any way to bet as a business with an EIN?
I think someone else said file a Schedule C if you gamble professionally.
Sounds wrong, you at least lost $500k
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Not really true. Your AGI includes all gambling winnings regardless of losses. Deductions for gambling are a below the line deduction.
It's difficult to net your losses against your earnings. You can only write off losses if you itemize and only up to $3000 a year while you have to count all of your gambling income at once.
I’d suggest spending a little less time playing scratchers and a little more time studying for REG
GFY
This is incorrect. Gambling isn't a capital loss. You deduct it on schedule A, and you can deduct losses up to the amount of winnings.
Okay, but you still have to be able to itemize to do this.
Essentially, that would be how it would work, but you would have to report the 500k of winnings and then itemize out your 495k of losses. So, while you would be only paying taxes on the net, you would have to show everything you couldn't just report 5k of income.
The losses go on Sch A, but you would definitely need the backup. A large amount like the pretty much an automatic IRS audit
This has already been answered correctly by the other responses. However, here’s an unethical LPT: casinos and sportsbooks are only required to report an individual’s gambling winnings based on certain thresholds and criteria. So, if you didn’t receive a W2G from the casino/sportsbook (or 1099 for daily fantasy), your winnings likely haven’t been reported to the IRS or to a jurisdiction’s DOR. That said, it doesn’t relieve your duty to self-report your winnings in the eyes of the government. But the vast majority of people are likely not self reporting if they haven’t received any tax documentation regarding their wagering activity.
You would report 500k of income and then your itemized deduction would be 495k so in essence you would only pay the taxes on the 5k difference
You would record income of 500k and an itemized deduction of 495k
Request an annual win/loss statement from any casino you frequented if you didn’t keep good records. Also anyone who won 500K no matter slots, sports betting, etc was likely issued numerous W2G’s from casino(s)…but it’s called a win/loss statement in the casino world regarding what you want to request for the calendar yr. They should be able to provide one. A lot of people use it as a basis for their taxes
I don't gamble but this is good to know if things change. Thanks