When it comes to declaring online wagering profits to the IRS at tax time, are you allowed to deduct losses from the gross winnings and pay taxes on the net profit (grossing winnings - losses)? I have heard that since online wagering is technically not a legal source of income in the US, that you would not able to deduct the losses and would have to pay taxes on the gross winnings, not the net profit. Any advice would be greatly appreciated! Thanks.
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WINNINGS on LINE 21
LOSSES DEDECTED ON SCHEDULE A
ONLINE GAMING IS NOT ILLEGAL ON THE FEDERAL LEVEL IN THE U.S........but certain States have laws forbidding online gaming.Comment -
I think gambling losses are gambling losses here is what the IRS has to say about it...
Topic 419 - Gambling Income and Losses
The following rules apply to casual gamblers. Gambling winnings are fully taxable and must be reported on your tax return. You must file Form 1040 (PDF) and include all of your winnings. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. For additional information, refer to Publication 525, Taxable and Nontaxable Income.
A payer is required to issue you a Form W-2G (PDF) if you receive certain gambling winnings or if you have any gambling winnings subject to Federal income tax withholding. All gambling winnings must be reported, including winnings` that are not subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax.
You may deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction that is not subject to the 2% limit on Form 1040, Schedule A. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return. It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. Refer to Publication 529, Miscellaneous Deductions, for more information.
-source IRS.GOVComment -
What EXCEL has posted is exactly the way I have reported my wins and losses over years.......been audited and was told I did everything perfect.
KEEP A DIARY
REPORT ALL WINS ON LINE 21
LOSSES ON SCHEDULE A UP TO BUT MORE THAN ON LINE 21
SIMPLE, SIMPLE, SIMPLE.........do not make this harder then it is folks.
I've deducted millions over the years.Comment -
Thanks for your reply! Do you have to provide actual documentation from the online sportsbooks you wager at? Or is your personal diary of betting records sufficient documentation?Comment -
FH is sharpComment -
Originally posted by brucieron
An ACCURATE DIARY is all that is REQUIRED...........but documents, receipts, and the like can be used to show further proof.
The DIARY should contain at minumum.......
DATE
VENUE
GAME
WON/LOSTComment -
I file as a pro and use a schedule C and can deduct pretty much everything involved with betting as a business expense. You will, however, have to pay self-employment tax.
Vast majority of people can't qualify to file as a pro, so advice here is appropriate.Comment
