How to Prove Gambling Losses on Taxes — Top Tips

Did you win big at the casino last year? Or maybe you lost your shirt? Either way, your gambling winnings or losses should be reported on your 2022 tax return.

If you were fortunate enough to win some money gambling, you will have to give Uncle Sam a share. Most gambling winnings are subject to federal income tax withholding. The good news for those who lost money gambling is you may be able to deduct your losses from your tax debt.

You must itemize all your deductions to deduct your gambling losses on your tax return. If you claim the standard deduction, you won’t be able to write off those gambling losses.

You should also be pretty prepared if you want to deduct your gambling losses. The IRS requires you to prove your gambling losses by submitting detailed information on all your gambling wins and losses throughout the year. The key is you can’t deduct losses that amount to more than what you’ve won.

For example, say you lost $5,000 playing blackjack on a weekend trip to Las Vegas. If you gamble at other times throughout the year and have won $3,000, you can only deduct up to $3,000 on your tax return.

The easiest way to keep track of your gambling winning and losses throughout the year may be to create a spreadsheet in Microsoft Excel or Google Sheets. Besides keeping track of the amounts you win and lose, the spreadsheet should also include the following:

• the date you were gambling

• type of gambling you were doing (i.e., lotteries, raffles, horse races, sports betting, or casino games)

• names of people you were with

• address of the gambling site

According to TurboTax, documents you can use to prove your gambling losses include:

• IRS Form W-2G

• Form 5754

• Wagering tickets

• Canceled check or credit records

• Receipts from the gambling facility

Typically, if you win at gambling, the place where you won must report your winnings to the IRS on a W-2G form. You should also receive a W-2G form from the gaming organization if your winnings meet the following thresholds.

• $1,200 or month on slot machines or playing bingo

• $1,500 or more from KENO

• Over $5,000 from poker

• $600 or more on all other games, as long as the payout is at least 300 times your wager

• If the prize money is subject to tax withholding

Remember, the IRS is getting the same W-2G form you get, so if you forget to report your winnings, they’ll know. Failing to report your winnings could result in the IRS charging you penalties, additional tax, and interest.

The IRS adjusters will probably raise their eyebrows if they see you trying to claim a substantial gambling loss, especially if you aren't a professional gambler. For professional gamblers, deducting gambling losses is a whole different ballgame. Because gambling is their business, a professional gambler can deduct their losses as a business expense.

However, if gambling is just a hobby for you, you risk getting audited if you claim a significantly large gambling loss.