Do you like to gamble? Do you ever win? If the answers to these questions are 'yes,' you need to know about deducting your gambling losses.
- Mar 16, 2012 For his latest blog, poker pro Alec Torelli discusses how to get over massive losses. This is a two-part series on recovering from downswings, shifting perspective, maintaining a positive outlook.
- Jun 12, 2019 And that is you can deduct your gambling losses from your gross income. But, there is a limit to this. You can only deduct losses to the value of what you have won and not more. For example, if you won $2 000, you can claim back gambling losses up to the amount of $2 000 and not over.
How To Get Over Gambling Loss
Jun 04, 2019 Neither do I have trouble tilting over losses or going over a certain stop/loss I've set. I don't care about a big downswing or a massive lost pot if I've at least played well enough. The problem is, every time I get stacked from a bad play or lack of discipline, I walk away and need 2 weeks or more to recover.
All Gambling Winnings Are Taxable Income
All gambling winnings are taxable income—that is, income that is subject to both federal and state income taxes (except for the seven states that have no income taxes). It makes no difference how you earn your winnings, whether at a casino, gambling website, Church raffle, or your friendly neighborhood poker game.
It also makes no difference where you win: whether at a casino or other gambling establishment in the United States (including those on Indian reservations), in a foreign country such as Mexico or Aruba, on a cruise ship, Mississippi river boat, or at a gambling website hosted outside the U.S. As far as the IRS is concerned, a win is a win and must be included on your tax return.
All Your Winnings Must Be Listed On Your Tax Return
If, like the vast majority of people, you’re a recreational gambler, you’re supposed to report all your gambling winnings on your tax return every year. You may not, repeat NOT, subtract your losses from your winnings and only report the amount left over, if any. You’re supposed to report every penny you win, even if your losses exceeded your winnings for the year.
Gambling Losses May Be Deducted Up to the Amount of Your Winnings
Fortunately, although you must list all your winnings on your tax return, you don't have to pay tax on the full amount. You are allowed to list your annual gambling losses as an itemized deduction on Schedule A of your tax return. If you lost as much as, or more than, you won during the year, you won't have to pay any tax on your winnings. Even if you lost more than you won, you may only deduct as much as you won during the year.
However, you get no deduction for your losses at all if you don’t itemize your deductions—just one of the ways gamblers are badly treated by the tax laws.
How To Get Over Gambling Losses Tax
You Need Good Records
As the above rules should make clear, you must list both your total annual gambling winnings and losses on your tax return. If you’re audited, your losses will be allowed by the IRS only if you can prove the amount of both your winnings and losses. You’re supposed to do this by keeping detailed records of all your gambling wins and losses during the year. This is where most gamblers slip up—they fail to keep adequate records (or any records at all). As a result, you can end up owing taxes on winnings reported to the IRS even though your losses exceed your winnings for the year.
This has happened to many gamblers who failed to keep records. For example, Bill Remos, a Coca-Cola delivery driver in Chicago, gambled for fun and got lucky: He won $50,000 in a single game of blackjack. When Remos filed his taxes for the year he didn’t report the $50,000 win as income. Why? He knew he had at least $50,000 in gambling losses during the year. He subtracted his losses from his winnings and ended up with zero; so he figured he didn’t have any gambling income to list on his return. Makes sense, doesn’t it? Not to the IRS. Remos was audited by the IRS. Because he failed to follow the rules and couldn’t document his losses, he had to pay income tax on his entire $50,000 blackjack win. He ended up owing the IRS $17,000 in back taxes. This on an annual income of only $32,000!
Will the IRS Know?
Gambling is a cash business, so how will the IRS know how much you won during the year? Unfortunately for gamblers, casinos, race tracks, state lotteries, bingo halls, and other gambling establishments located in the United States are required to tell the IRS if you win more than a specified dollar amount. They do this by filing a tax form called Form W2-G with the IRS. You’re given a copy of the form as well. When a W2-G must be filed depends on the type of game you play. For examplle, the casino must file a W2-G if you win $1,200 or more playing slots; but only if you win $1,500 or more at keno. Thus, if you have one or more wins exceeding the reporting thrseshold, the IRS will know that you earned at least that much gambling income during the year. If this income is not listed on your tax return, you’ll likely hear from the IRS.
The Rules Differ for Professional Gamblers
If you gamble full-time to earn a living, you may qualify as a professional gambler for tax purposes. Professional gamblers inhabit a different tax universe than those who gamble for fun. In general, gambling pros are treated better by the IRS than amateurs, but few people qualify as gambling professioanls.
For his latest blog, poker pro Alec Torelli discusses how to get over massive losses.
How To Get Over Gambling Losses In Nfl
This is a two-part series on recovering from downswings, shifting perspective, maintaining a positive outlook and general happiness. It is in response to “Saxophone,” on TwoPlusTwo, who is struggling to recover from losing a $500,000 bankroll.
Preface: A Personal Story
Walking through the Bellagio, I see a large crowd gathering around a bunch of screaming people. I stop to see the cause of the commotion. “What’s going on?” I ask a man huddled at the back.
“Kevin Garnett and Paul Pierce are playing blackjack.” I nudge my way to the front. The group erupts, hands flailing into the air. In the process, a drunk man nearly spills his beer on my head. They must have won a fortune.
When their hands came into view the first thing I noticed wasn’t their bets, but Kevin’s watch. Massive, embedded with diamonds, it shined, even on the dimly lit casino floor. My eyes followed his wrist down his hand and then his fingers. It can’t be. I squinted to make sure, but the two neatly stacked red chips were unmistakable. They were betting $10 per hand.
The Reason: Stimulation
Even though they were barely playing, the excitement created a lot of fuss. On the other hand, a high stakes poker player with a fraction of the net worth can win three zeros more then them without flinching. How is this possible? When we gamble our minds develop a tolerance to the stimulation, no different than the alcoholic who can put back 10 shots. Excessive becomes normal.
There’s only so much fluctuation we can handle before the money becomes real. Once we pass this threshold, emotions return.
When we win, joy and euphoria. When we lose, pain and panic. The losses are always worse than the wins. They are so detrimental to our state of being that I refer to the tipping point for pain as the pain threshold (PT). PTs vary depending on frequency of play. For two athletes who rarely risk money, the least amount of volatility is exciting.
The Problem: Compulsion
If one chooses to gamble, crossing the PT is unavoidable. It can be avoided by implementing stop losses before they are reached or taking breaks after significant losing streaks. Nevertheless, while these tips are good in practice, they don’t always work.
First we have to cross them to know where they are. And also a big game with a lucrative spot is often too irresistible for even the most conservative poker player to turn down. Let’s face it, we like to gamble. The real problem, then, is how do we recover when the inevitable happens?
The Physical Solution: Taking Action
The life of a poker player desensitizes one to money. Personally, this is a constant battle because I'm nowhere near rich enough to justify such an indifferent mindset. The biggest hand I’ve lost is $475,000. The biggest downswing I’ve had is $1,000,000. Following both, I experienced a sense of loss, despair and a void, similar to the pain of a bittersweet breakup. In my experience the best way to recover from such a traumatic experience is to compartmentalize the two distant realities: poker and life.
I know that my PT is the most I can lose without losing perspective. Win cap (WC), is the opposite. When either of these lines are crossed, I take a day off to do something explorative, creative, and new. Something as simple as trying a different restaurant, walking through a unseen part of town, or exercising can make the difference between a successful reset or a stressful morning.
For further therapy, I make a small reward or recovery purchase. This reinforces the truth that the money I make in the poker world has value in the real world and motivates me to play better.
Sometimes I don’t have the liberty of a day off. A lucrative cash game compels me to grind, or even more imminent, I cross my PT during a session and want to continue playing. The quickest way to refocus is a bit disturbing, even blasphemous, but it works. I rip up money.
That’s right. I walk away from the table, take out a $1 bill, tear it to pieces and throw it away. If you just cringed, that’s good. It’s intended to be painful and remind us that our distress is not because of the money, but that the brain is addicted to the stimulation.
In order to recreate this spark, we need more fuel and higher levels of fluctuation. This petty $1 sacrifice saves thousands at the table.
Lastly, we must remember the thing that trumps all — happiness. When debating whether or not to play poker, we shouldn’t make our decisions based on EV (expected value) in dollars, but on how it will affect us mentally, hEV (happiness expected value).
Physical recovery is important in the short term: losing sessions and bad days. But in the long term, for losing months and busted bankrolls, a mental shift is required.
For all my blogs and content, visit www.alectorelli.com. Your feedback is important to me. Feel free to share your thoughts, ask me questions or leave a comment. Follow me on Twitter at @AlecTorelli. For other matters you can email me at [email protected]
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How To Get Over Gambling Losses Without
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