Whether the economy is expanding or contracting, gambling remains a popular pastime. So, if you are an amateur (nonprofessional) gambler, you may need to know the applicable federal income tax rules that follow.

Whether you play cards, roll dice, bet the ponies, or enjoy the slots as a casual gambler, your gambling winnings are fully taxable and must be reported on your tax return. You can also deduct your gambling losses, but only up to the extent of your winnings. Note that any excess losses cannot be carried over to future years.

If you qualify as a professional gambler, your wagering winnings and losses are reported as a profit or loss from a business on your tax return. However, your deductions for wagering losses are limited to your winnings, and any excess wagering losses cannot be carried over to future years (same as for amateurs). You may also be able to deduct travel expenses and other out-of-pocket costs of being a professional gambler. Note that it is extremely difficult to qualify as a professional gambler.

In any case, you must adequately document wagering losses (and out-of-pocket non-wagering expenses if you are a pro) to keep the IRS happy. The government says you must compile the following information in a log or similar record:

  • The date and type of specific wager or wagering activity.
  • The name and address or location of the gambling establishment.
  • The names of other persons (if any) present with you at the gambling establishment. (Obviously, this is not possible when the gambling occurs at a public venue such as a casino, race track, or bingo parlor.)
  • The amount won or lost.

For example, the IRS says you can document income and losses from wagering on table games by recording the number of the table that you played and by keeping statements showing casino credit that was issued to you. For lotteries, your wins and losses can be documented by winning statements and unredeemed tickets.

Last but not least, be aware that amounts you win may have to be reported to you (specific minimums apply) on IRS Form W-2G (Certain Gambling Winnings) by the gambling establishments. In some cases, federal income tax may have to be withheld, too. Anytime a Form W-2G is issued to you, the IRS gets a copy.