Jul 30, 2018  Claiming Gambling Winnings and Losses On Federal Tax Returns On behalf of Kershaw, Vititoe & Jedinak, PLC posted in Federal Taxation on Monday, July 30, 2018. Winnings from gambling of any kind are fully taxable under federal law. The amount of gambling losses you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000, or carry it forward to future years. Gambling Income Tax Record Keeping A better method for keeping track of your gambling activities is to create a daily log book. Maintaining a record of your winnings and losses on a daily basis may reduce your taxes.

Losing money on a stock you've invested in is never welcome news. However, you can minimize the damage by claiming the loss as a deduction on your income taxes. Writing off a stock market loss is a bit complicated because you must combine it with other capital gains and losses you had during the year.

Deductible Losses

Stock market gains or losses do not have an impact on your taxes as long as you own the shares. It's when you sell the stock that you realize a capital gain or loss. The amount of gain or loss is equal to the net proceeds of the sale minus the cost basis. Net proceeds are the gross sale proceeds minus sales costs such as broker's commissions. Cost basis is the price you paid for the shares plus any transaction costs. If the cost basis is more than the net proceeds, you have a loss on the stock.

Grouping Gains and Losses

A stock sale can yield a short- or long-term gain or loss. The gain or loss is short-term if the stock is owned for one year or less. If you own the shares for more than a year, they are a long-term investment for tax purposes. When figuring losses and gains for your income taxes, you first use losses to offset gains of the same type. Thus, add a long-term stock loss to other long-term capital losses and subtract them from the total amount of long-term gains for the year to figure long-term gain or loss. Subtract your total short-term capital losses from short-term capital gains to find net short-term gain or loss.

Offsetting Loses

When you have a net short-term or long-term loss from stock trades and other investments, it may be used to offset net gains of the other type. That is, a net short-term loss can be subtracted from a net long-term gain, and a net long-term gain is subtracted from a net short-term loss. If you have an overall loss after offsetting net gains, it may be deducted from your other income such as your salary, up to a limit of $3,000. Overall capital losses in excess of $3,000 can be carried forward to future years.

Significance

Keeping accurate records of short- and long term stock market losses and gains is essential because the tax consequences are different. Long-term gains are taxed at a maximum rate of 15 percent. Short-term gains are taxed at ordinary income tax rates, which were as much as 35 percent as of 2012. Suppose you have a stock market loss of $2,000. When you claim it as a deduction on your income taxes, it can save you at most $300 if you must use it to offset long-term gains. However, when you can use the loss to offset short-term gains or other income, your tax savings can be as much as $700.

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Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.

If you had a successful night at the slots or poker tables, you're going to have to share some of the lucky proceeds with Uncle Sam. The Internal Revenue Service generally requires that you report your gambling winnings and losses separately when you file your taxes rather than combining the two amounts.

Record Keeping

As you gamble during the year, you need to keep records of your winnings and losses so that you can support whatever figures you report on your taxes. The IRS permits you to use per-session recording, which means that instead of recording whether you won or lost each time you pull the slot machine, you can simply record your total for the session. Your records should include the date and type of gambling, where you gambled and if you gambled with anyone else, such as a home poker game. If you win more than $600, you should receive a Form W-2G from the casino.

Taxable Winnings

When figuring your gambling winnings, only include the winnings from each session rather than using losses to offset your gains. You have to include gambling winnings even if you didn't receive a Form W-2G from the casino. For example, if you gambled six times during the year, winning $100, $3,000, $4,000 and $6,000 but losing $5,000 and $2,000, your gambling winnings for the year are $13,100. This amount gets reported on line 21 of your Form 1040 tax return.

Gambling Losses

To claim your gambling losses, you have to itemize your deductions. Gambling losses are a miscellaneous deduction, but -- unlike some other miscellaneous deductions -- you can deduct the entire loss. The deduction goes on line 28 of Schedule A and you have to note that the deduction is for gambling losses. For example, if you lost $5,000 on one occasion and $7,000 on another, your total deduction is $12,000.

Gambling Loss Limitation

You can't deduct more in gambling losses than you have in gambling winnings for the year. For example, suppose you reported $13,000 in gambling winnings on Line 21 of Form 1040. Even if you lost $100,000 that year, your gambling loss deduction is limited to $13,000. Worse, you aren't allowed to carry forward the excess, so if you had $87,000 in losses you couldn't deduct last year, you can't use that to offset the gambling income from the current year.

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Claiming Losses On Tax Return

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Deductible Losses For Taxes

Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by 'Quicken,' 'TurboTax,' and 'The Motley Fool.'