Today TaxMama hears from Chet in the TaxQuips Forum, who is concerned. “I gambled online quite extensively last year. However have a large net loss for the year. I have only “cashed out” of my online gambling account twice all year. I haven’t done the math yet, but I know I have a net loss. I know that I am supposed to report winnings and losses, but I am concerned that if I report it as online gambling, I could get in trouble, as online gambling is technically illegal in the U.S. What should I do?”
I devoted quite a bit of time to researching the online gambling issue about a year or two ago. As of right now, online gambling is NOT illegal in the United States. Congress has been planning on passing legislation to define it one way or another – but have never quite gotten their act together.
Read this article in MarketWatch.com – nothing has changed since I wrote it in 2009. IRS is not a problem for you. It will all hinge on your state. If your state doesn’t specifically make it illegal – it’s not illegal.
The article will explain the issues and how to report the wins and losses. Essentially, you simply report the income as “Gambling Income” on line 21. Deduct the losses on Schedule A, Line 28 – under Other Miscellaneous Deductions. The deduction does not get reduced by 2% of your adjusted gross income. Good luck!
And remember, you can find answers to all kinds of questions about online gambling, and other tax issues, free. Where? Where else? At www.TaxMama.com.
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