How to Protect Your Gambling Winnings from the IRS
Your gambling income is taxable and it’s reportable by the casino. The good news is that you can offset your gambling winnings with your gambling losses provided you keep good proof of those losses.
- The IRS and courts expect you to maintain a “contemporaneous gambling diary.”
You face specific rules for a gambling diary depending on the type of gambling.
For example, with slot machines, the IRS advises that you record the:
- machine number
- and time played to support your winnings or losses
Often, you can find the machine number clearly displayed on the machine. If not, simply ask the casino operator for the machine number.
If your gambling losses exceed your winnings, you get no deductions for your net loss. Further, the net loss does not carry forward. It simply disappears.
As you can see, you need to know how the rules work if you gamble. Don’t reach the end of the year with lots of income on Form W-2Gs and no appropriate tax records for your losses. The lack of documentation will bite you in the butt every time.