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can you claim losing lottery tickets on your taxes

Can I Claim Lottery Scratch-Offs on My Taxes?

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It’s common knowledge that if you’re lucky enough to win the lottery, Uncle Sam will invariably expect a portion. However, many people are not aware that they can also claim some lottery losses on their federal income taxes. As far as the IRS is concerned, these winnings are considered gambling regardless of whether they are from a raffle, a scratch-off, sports betting, lotto ticket, horse race or a slot machine payout from a casino – all must be reported as taxable income.

There are limitations to claiming these winnings. In order to claim the gambling loss deduction on your losses, you must also report any winnings (regardless of amount) on your tax return.

Are Lottery Tickets Tax Deductible?

The short answer to this question is, yes, you can claim non-winning lottery tickets on your taxes. But, like most things involving the IRS, there are rules and requirements that must be met in order to do so. You won’t be able to deduct losses on your taxes if you go with standard deductions. To claim lotto ticket losses on your taxes, first, you will have to be eligible to itemize. If your total gambling losses – plus all of your other itemized expenses – exceed the standard deduction for your filing status, only then would you itemize.

To report any gambling winnings, keep accurate journals or records and proof of all your winnings and losses. These records should detail the date of your winnings or losses and the type of gambling you participated in. In addition, you will need the name of the people you were with and the amount you won or lost. Also, it’s advised to keep losing scratch-off tickets, casino receipts, canceled checks or credit card statements that you used to gamble.

In the event the IRS takes a second, closer look at your tax returns, you will be able to easily prove any gambling losses tax deduction that you claimed.

How to Report Gambling Losses

Because you need to itemize to claim these deductions, you have to use IRS Form 1040 to report your winnings and losses. You will list all winnings you’ve received from gambling on ​Schedule 1, line 8​ of Form 1040, entitled Other Income. This should include winnings of any amount regardless of whether you were given cash at a poker game or you won a car at the casino.

Report gambling losses on Schedule A found on Form 1040 under Other Miscellaneous Deductions. To claim these deductions, you must report all of your winnings as income as well as claiming your qualifying losses separately. You cannot report only your losses or you might find yourself in hot water with the IRS.

Limitations on the Gambling Loss Deduction

While you can deduct gambling losses, these deductions cannot exceed the amount of your total winnings. For example, if you win $1,000 playing the lotto, but you’ve purchased $2,000 worth of losing tickets, you can write off the losing tickets only up to the amount of your $1,000 winnings, and not the entire $2,000 you lost playing.

The IRS does this because if you were allowed to deduct all of your losses, then the government would in essence be subsidizing gambling. With this rule in place, at most, you can avoid having to pay taxes on what you did win.

Deductions for 2020

The definition of deductible gambling losses increased in 2018 to cover expenses involved in gambling beyond the cost of the bet itself. For example, the cost of travel to a casino or track might be deductible, or the cost of phone calls to place bets in states that allow betting by phone. This might not apply to lottery players in most cases, since there are rarely non-bet expenses involved in buying lottery tickets.

On the other hand, the standard deduction for single taxpayers is ​$12,400​ in 2020. This may mean fewer players will find it advantageous to itemize to deduct those gambling losses.

It is possible to claim losing lottery scratch-offs on your taxes, but the IRS has specific rules in place to make sure you’re paying your fair share. The gambling loss deduction can only be taken to offset gambling winnings and can only be taken if you itemize your federal deductions.

Can You Deduct Gambling Losses From Your Taxes?

The IRS views winnings from gambling as taxable income, but did you know that you’re allowed to deduct gambling losses , too? While losing money at a casino or the racetrack does not by itself relieve your tax burden, it can reduce taxes owed for your other winnings, ultimately saving you money.

How to know if you can deduct your gambling losses

Gambling loss deductions save you money by reducing your taxable income. But there’s a trick to this—you can’t claim gambling losses that exceed your winnings, as losses are inextricably linked to your winnings for tax purposes. If you have no winnings to claim, you can’t deduct your losses.

As an example, let’s say that in a given year you went gambling twice , winning $6,000 in one instance, but losing $8,000 in another. In this case, you can only deduct $6,000 from that $8,000 loss. The remaining $2,000 in losses can’t be carried forward or written off. Conversely, if you won more than you lost, you’d owe taxes on the difference between your winnings and losses as “other income ”— but at least those taxes would be reduced.

(If you’re a full- time, professional gambler the requirements are different : you will report your earnings like they have resulted from a business, as self-employed income).

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How to claim gambling losses

Deductible g ambling losses can result from online casinos, poker games, sports betting, lotteries, prize draws, horse and dog racing, and even your office fantasy sports pool. To report any of these gambling losses, you’ll be required to itemize your deductions. This makes sense if the total of all your itemized deductions exceeds the standard deduction ( $12,400 for taxpayers who are single or are filing separately from their spouse). If you claim the standard deduction, y ou don’t get the opportunity to reduce taxes for winnings owed by deducting gambling losses.

Keep in mind that you must be able to substantiate any losses you’re claiming , which means you’ll need to keep records of your gambling.

Track your winnings and losses

You can’t just say “I lost a bunch of money gambling” to the IRS. They require you to provide records of your winnings and losses to back your claim. Therefore, you should keep t rack of :

  • the date and time of your gambling session
  • the type of gambling
  • the name and location of the gambling venue
  • the people you gambled with
  • how much you bet, won and lost

You should also keep credit cards statements, payout slips, receipts, tickets, bank withdrawal records, and statements of actual winnings. Other documentation can include:

  • Form W-2G (typically given or mailed to you by casinos after a big payout)
  • Form 5754 (a form for when you’re part of a group that earns money through gambling; you might see one of these if you and your co-workers are cashing in a winning lottery ticket)

Do you or someone you know need help with a gambling problem? Call the National Problem Gambling Helpline Network (1-800-522-4700).

The IRS views winnings from gambling as taxable income, but did you know that you’re allowed to deduct gambling losses, too? While losing money at a casino or the racetrack does not by itself relieve your tax burden, it can reduce taxes owed for your other winnings, ultimately saving you money. ]]>