Ever since posting "When Do I Report Gambling Winnings to the IRS?" we have had several inquiries about writing off gambling losses. So, here's the question: "Can I write off my gambling losses?"
With sports gambling legalized in Ohio since January 1, 2023, it's the 2024 tax season when this massive increase in tax questions regarding gambling and gambling losses have come in to our tax office.
Although the IRS goes into detail about deducting your gambling losses on form 1040, they further go into detail to explain "your gambling loss deduction cannot be more than the amount of gambling winnings" which will be of no tax advantage to the average Clevelander that's lost their shirt on some Browns' bets.
What Are the Rules About Writing Off Gambling Losses?
Typically, once you know the rules about writing off gambling losses, you won't end up writing them off, so when we're asked if you can write off gambling losses our answer is "probably NOT!"
Must Itemize Deductions. Gambling Losses Can Not Exceed Winnings.
While losses ARE deductible on schedule A, this is true ONLY if you itemize deductions. In addition, under current tax laws, you can only write off gambling losses up to gambling winning. Also the winnings without netting for losses ARE taxable for state and local taxes. There are two possible exceptions to this.
1. Session Gambling Exception:
There is an exception regarding “session gambling.”
You may be able to net losses against winnings if it is considered a gambling session. Usually this is one day at a casino or possibly a poker tournament.
2.Gambling Professionals:
If you gamble regularly with the intent to make a profit and pursue full time, rather than a hobby, you may qualify as a gambling professional. If you do qualify, filing your taxes as a gambling professional could use the skill of our small business tax professionals. A gambling professional can take all reasonable expenses, such as travel and all expenses that are ordinary and necessary to make a profit.
Don't Let Gambling Winnings Lead to Unexpected Tax Bills
Gambling has tax implications and can, for the uninformed, lead to unexpected tax bills and complications. If you want to discuss the tax implications of your gambling activities, fill out the form on this page or call us at 440-777-2207.
Small Business Tax Services
As an expert in small business tax services and tax consulting Ken-Mar Tax eats, sleeps and breathes small business tax strategies. Being an enrolled agent allows founder, Ken Weinberg, to represent you to the IRS - something only a CPA, tax attorney and Enrolled Agent can do. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. It also means he is continuously being updated on the new IRS tax codes and taking classes from the IRS that provide guidance on how to file returns so that they are not "flagged."
When you get your taxes prepared by Ken Mar Tax you also have the option to purchase the Tax Audit Protection Plan to avoid the extra costs of paying for audit representation. If you are audited by the IRS, State of Ohio or local taxing authorities, Ken-Mar Tax will meet with the taxing authorities on your behalf to negotiate a settlement for you. The fee covers all costs up to the Appeals level, including up to 15 hours of correspondence with the auditing party – either the IRS, State of Ohio or locality.
