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DEFINITION of Gambling Loss
A gambling loss is a loss resulting from games of chance or wagers on events with uncertain outcomes (gambling). These losses can only be claimed against gambling income.
BREAKING DOWN Gambling Loss
The Internal Revenue Service (IRS) views gambling wins as income, and therefore requires people to pay tax on the winnings. It allows people to deduct their gambling losses if they itemize their deductions. The IRS also requires taxpayers to keep a diary of winnings and losses in order to deduct losses. Winnings or losses can be from the following gambling activities: lotteries, raffles, dog races, horse races, casino games, poker games and sports events. Taxpayer notes must include the date and type of gambling, the name and address of the gambling venue, the people that the taxpayer gambled with if applicable, and the amounts won and lost.
Gambling losses that are deducted cannot exceed the winnings reported as income. So if a gambler has $3,000 in winnings but $7,000 in losses, he or she can only deduct $3,000. The remaining $4,000 cannot be written off or carried forward to future years. If a gambler has $3,000 in winnings and $1,000 in losses, he or she can report the $3,000 as income and then claim the $1,000 as an itemized deduction.
The Effects of Gambling Loss
Large gambling losses are stressful and can trigger or exacerbate a gambling addiction. For example, a person can win $10,000 at Casino A one night and lose $9,000 at Casino B the next night. Despite the leftover $1,000, that gambler is sent home the first night with a W-2 for the $10,000 from Casino A and must still pay taxes on that income.
Oklahoma Gambling Losses 2018
Gambling loss can not only have psychological and financial effects, but it can lead to other destructive behaviors. Crippling gambling loss or debt can lead to embezzlements, writing bad checks and committing other crimes in order to cover a gambler’s losses. Gambling can be a serious addiction and affect a person’s family life and career in many negative ways.
What Does It Mean To Deduct Gambling Losses
Don’t Get Caught Chasing
Irs Rules On Gambling Winnings And Losses
A specific form of entrapment that some gamblers struggle with is the urge to chase their losses. Chasing losses simply means trying to win back money you’ve already lost by gambling more. Unfortunately, chasing usually results in more losses – which can then lead to more chasing – creating a vicious cycle that can be difficult to break. Remember to treat gambling like any other form of entertainment that’s going to cost money – that’s one of the best ways to avoid the urge to chase losses.