Client Mailbag- Gambling Winnings


Dear Mike;

I just got back from a trip to Vegas and was lucky and had some good winnings. Are these gains taxable?

Cool Hand Luke

Dear Cool Hand Luke:

Congratulations! Now the bad news. Gambling winnings, whether legal or illegal, are includable in gross income. For nonprofessional gamblers, wagering losses are itemized deductions, meaning they can only claim the loss if they forego the standard deduction. Professional gamblers, who pursue wagering as a full-time activity and not as a hobby, may treat their gambling losses as trade or business expenses. However, loss deductions for both professional and nonprofessional gamblers are limited to the amount of gambling gains, and excess losses and expenses cannot be carried over to other tax years. The Tax Cuts and Jobs Act expanded allowable gambling losses to include other expenses incurred in connection with the conduct of that individual’s gambling activities. For example, expenses incurred in traveling to and from a casino fall within the scope of the gambling loss limitation. Gambling losses must be established by adequate evidence. The easiest way to do this is to keep a diary of expenses. The diary should include:

1. the date and type of each specific wager or wagering activity;
2. the name of the gambling establishment;
3. the address and location of the gambling establishment;
4. the names of other persons (if any) that were present with the taxpayer at the gambling establishment; and
5. the amounts won and lost.

There are also specific guidelines for documenting specific types of wagering transactions.