Today TaxMama hears from Linda in the TaxQuips Forum who wants to know. “How do I prove to the IRS that we can now net gambling losses against gambling winnings, per day, per gambling establishment, instead of deducting these losses on Sch A?
Dear Linda,
If you do your record keeping properly and consistently, you can net your gambling winnings per day – per establishment. There is nothing to prevent you from doing that, with good records.
However, your desire not to report your gambling losses on Schedule A? That’s out of the question. Unless you are a professional gambler, you are only permitted to report your losses on Schedule A. Worse, since gambling losses are only allowable up to your gambling winnings, once you have net your losses for the day, you cannot deduct anything, unless you have a net profit for the day.
The only way to deduct your gambling losses, or costs on Schedule C is to be a professional gambler. In other words, you make a living at gambling. That means, your gambling efforts net out at enough of a profit to live on. If you are supporting yourself with a job, or investments, or a business, or a pension, rather than your gambling winnings, you’re not a pro. Also, as a professional gambler, you must register as such with each establishment where you gamble.
This isn’t much of a gray area. These issues have been adjudicated many times. Do some research in the Tax Court archives and read the judges’ deliberations. They will help clarify the Court’s thinking and the legal process. It’s actually quite interesting.
And remember, you can find answers to all kinds of questions about gambling and other tax issues, free. Where? Where else? At www.TaxMama.com.
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