Gambling winnings vs losses

[Janitor Bob]

Brain Fart here. Can gambling losses directly offset gambling winnings or can you only report losses on Sch A subject to 2% income limitation?

Client won $2300, but in doing so, spent $4,200.

[Don in Upstate NY]

Answer is ... NONE OF THE ABOVE.

Gambling winnings are reported on 1040 line 21 while gambling losses (to the extent of winnings) are reported on Schedule A line 28, NOT SUBJECT to the 2% haircut.

[Although the concept of a "haircut" somewhat eludes me.]

[Janitor Bob]

what about hobby income vs hobby expenses?

[Gail in Virginia]

And wasn't there a court case where casino winnings and losses at the same session could be netted?

[BulldogTom]

Hobby income and expense netted and put on line 21. Cannot show a loss.

Tom

Hollister, CA

[Lion EA]

No, hobby income and COGS put on line 21; expenses Sch A 2%. Guess gambling isn't a hobby.

And, yes, the IRS tried to clarify using gambling losses by session, but it looked even more confusing to me as they tried to define session.

[Janitor Bob]

Thanks everybody.....I tend to get "hobby" and "gambling" rules confused

[jainen]

>>it looked even more confusing to me as they tried to define session<<

It is worth figuring out though. The problem in the original post is that "Client won $2300, but in doing so, spent $4,200." If he doesn't itemize deductions, he gets taxed on $2300. Even if he does itemize, his AGI is still $2300 higher.

There are two ways to reduce the $2300. First subtract basis, that is, the amount of the winning wager. If you won $2300 with a $5 lottery ticket, that's only $2295 on Form 1040.

Then deduct non-winning wagers from the same session, poorly defined variously as a single game, a table, a day of playing, etc. So if you dropped all $4200 in one afternoon playing roulette, during which one spin came up plus $2300, in spite of that W-2G you don't have to report anything because you had a net loss in that session. In fact, if you won again the next day playing keno, you could offset it with the roulette loss on Schedule A.

The way you pull that off is with a contemporaneous logbook and other documentation showing the details required in Pub 529.

[SCL]

>>it looked even more confusing to me as they tried to define session<<

It is worth figuring out though. The problem in the original post is that "Client won $2300, but in doing so, spent $4,200." If he doesn't itemize deductions, he gets taxed on $2300. Even if he does itemize, his AGI is still $2300 higher.

There are two ways to reduce the $2300. First subtract basis, that is, the amount of the winning wager. If you won $2300 with a $5 lottery ticket, that's only $2295 on Form 1040.

Then deduct non-winning wagers from the same session, poorly defined variously as a single game, a table, a day of playing, etc. So if you dropped all $4200 in one afternoon playing roulette, during which one spin came up plus $2300, in spite of that W-2G you don't have to report anything because you had a net loss in that session. In fact, if you won again the next day playing keno, you could offset it with the roulette loss on Schedule A.

The way you pull that off is with a contemporaneous logbook and other documentation showing the details required in Pub 529.

The way you pull that off is with a contemporaneous logbook and other documentation showing the details required in Pub 529.

and there is the rub...LOL! grandma or anyone else does not have this logbook.

[jainen]

>>grandma or anyone else does not have this logbook<<

Then they need a better tax advisor! Look, when your client comes in and says they took business contacts to lunch, you tell them they need a logbook for their mileage and entertainment expenses, right? Same thing when they ask about gaming. You might miss it the first time, but not after that. Pub 529 tells them exactly what they need so you can print that page for them.

[JohnH]

Here's a handy gambling diary I discovered (I think I found it on this forum).

I give these to my clients who need them - most clients appreciate the guidance.

I think the site is good, and their diary is very good.

http://www.ladyluckdiary.com/

[bertrans]

Although an individual who represents himself as a professional gambler is still limited, on Schedule C, to deducting losses only up to winnings, he may also deduct all ordinary and necessary business expenses he incurred in the course of carrying out his business activity.

[SCL]

>>grandma or anyone else does not have this logbook<<

Then they need a better tax advisor! Look, when your client comes in and says they took business contacts to lunch, you tell them they need a logbook for their mileage and entertainment expenses, right? Same thing when they ask about gaming. You might miss it the first time, but not after that. Pub 529 tells them exactly what they need so you can print that page for them.

who said i don't tell them about recordkeeping? oh, it was you, mr strawman.

i guess a better tax advisor doesn't need adequate logical skills.

[jainen]

>>i guess a better tax advisor doesn't need adequate logical skills.<<

Sorry if I offended you, but I stand by my statement. In my opinion, ineffective advice is no better than wrong advice. Neither one gets the job done.

[SCL]

>>i guess a better tax advisor doesn't need adequate logical skills.<<

Sorry if I offended you, but I stand by my statement. In my opinion, ineffective advice is no better than wrong advice. Neither one gets the job done.

"but...blah, blah, blah"...since you insist on spinning your better tax advisor strawman fallacy, you are not sorry about anything asshat...sorry if i offend you.

what % of the gambling public do you think has a log book? my guess...less than 5%.

[joanmcq]

"but...blah, blah, blah"...since you insist on spinning your better tax advisor strawman fallacy, you are not sorry about anything asshat...sorry if i offend you.

what % of the gambling public do you think has a log book? my guess...less than 5%.

Yes, and they are screwed on audit. The rules are the rules.

And how many do you think pay on all their wins, not just what shows up on a W2G?

[Jack from Ohio]

"but...blah, blah, blah"...since you insist on spinning your better tax advisor strawman fallacy, you are not sorry about anything asshat...sorry if i offend you.

what % of the gambling public do you think has a log book? my guess...less than 5%.

Your professionalism and public speaking ethics are showing very clearly!!!

Insincere apologies are as sickening as calling someone a vulgar name in public.

Just my observation....

[jainen]

>>"but...blah, blah, blah"<<

That is unkind and I don't deserve it, SCL. Nobody on this forum cites actual regulations and procedures more than I do. Nor does anyone identify interpretation as "my opinion" more than I do. My participation here has always carried a strong theme of high ethics and solid professionalism. All of this is exemplified in this very thread. If you don't like it, you don't need to read my posts.

[SCL]

>>"but...blah, blah, blah"<<

That is unkind and I don't deserve it, SCL. Nobody on this forum cites actual regulations and procedures more than I do. Nor does anyone identify interpretation as "my opinion" more than I do. My participation here has always carried a strong theme of high ethics and solid professionalism. All of this is exemplified in this very thread. If you don't like it, you don't need to read my posts.

jeez jainen...put on your big boy pants. do you think you have a free pass to run over posters without some blowback?

you ignore your ad hominem/strawman attack at me that started this mess..."Then they need a better tax advisor!"

i don't disagree with your references to proper tax law and procedure. in fact, i appreciate it, learn from it, and almost always agree with it.

[SCL]

bump...

because i don't want this thread to get away without jainen knowing i respect his objective knowledge...

and that i'm sorry about any personal attacks.