Gambling Losses New Tax Law
Gambling losses are deductible only to the extent of gambling winnings and are reported as itemized deductions on Schedule A that are not subject to the 2%-of-adjusted-gross-income threshold; therefore, deductions for gambling losses are not among the miscellaneous itemized deductions suspended by the Tax Cuts and Jobs Act of 2017 (TCJA). The Tax Cuts and Jobs Act of 2017 (TCJA) will have broad-ranging effects on all kinds of individuals. Taxpayers with a personal connection to gambling (i.e., recreational gamblers) or one in the form of a trade or business (i.e., professional gamblers) will find that the revisions to Internal Revenue Code (IRC) section 165(d) may have far-reaching consequences in the years before the. Rules for Deducting Gambling Losses Under the new law, those who itemize deductions will continue to be able to deduct gambling losses up to the amount of their total winnings. For example, a slot player who wins $25,000 in jackpots may deduct up to that amount in verifiable gaming losses when they fill out an itemized tax form. You should only itemize if all your personal deductions, including gambling losses, exceed your standard deduction for the year. The Tax Cuts and Jobs Act (TCJA), the massive tax reform law that went into effect in 2018, made it much harder for most taxpayers to itemize.
The tax law allows you to deduct the amount of your gambling losses within certain limits. But these deductions are often contested in the courts.
Gambling Losses Under New Tax Law
Salvage gambling loss deduction.
If you incur losses from gambling activities during the year, you can deduct those losses up to the amount of your winnings. Although the Tax Cuts and Jobs Act (TCJA) suspends deductions for other miscellaneous expenses from 2018 through 2025, the gambling loss deduction remains intact. Furthermore, miscellaneous expenses are deductible only to the extent that the annual total exceeds 2% of adjusted gross income (AGI). But the 2%-of-AGI floor doesn’t apply to gambling losses.
Keep detailed records.
Although the tax law allows a limited deduction for gambling losses, this write-off isn’t a slam-dunk. Notably, you have to submit documentation to support your claims, including information on the dates and types of wagering activities, the names and addresses of the gambling establishments, the names of anyone who accompanied you at the activities and the amounts won or lost. Typically, you’ll have records of losing tickets, canceled checks and casino credit slips. Also, keep corroborating information (e.g., hotel bills and plane tickets.)
Gambling Loss Deduction New Tax Law
Going for broke.
In rate instances, a long shot for a gambling deduction may pay off. New case: An insurance consultant who was a compulsive gambler won about $350,000 during 2014, the tax year in question. But he didn’t produce documentation at trial and instead relied on the “Cohan rule” for an estimate of losses. The Tax Court judge gave credence to the testimony of a gaming expert who concluded that the taxpayer lost more than that amount. Also, the Court looked to the dire financial situation the taxpayer remained in. Result: The loss was allowed (Coleman, TC Memo 2020-146, 10/22/20).