How to Prove Gambling Losses on Taxes: Tips from Vegas Bookkeeping Experts

As a professional gambler, this number might make you uneasy. But did you know that losses aren’t just part of the game; they directly impact taxable income?

Since you treat gambling as a business, you’re required to report winnings and losses to the IRS. And here’s something many gamblers overlook: with the right records, some of those losses could significantly reduce your tax burden.

While the IRS allows professional gamblers to deduct losses as business expenses, it’s not as simple as estimating an amount. Without proper documentation, you risk overpaying on taxes—or worse, facing an IRS audit.

This guide, with tips from Las Vegas bookkeeping experts, breaks down how to prove gambling losses on your taxes and avoid paying more than you owe, all the while ensuring compliance. 

Why reporting gambling activity is important

The IRS expects all gambling winnings to be reported as taxable income, no matter how small. Casinos typically issue Form W-2G^[2] for significant wins, but even if you don’t receive this form, you are still required to report your winnings, that is, if you’re a taxpayer.

The IRS treats gambling income like any other form of income, which includes cash prizes and the fair market value of non-cash prizes like cars or vacations.

Failing to report or underreporting gambling winnings can have serious consequences. In most cases, the IRS assumes the omission was unintentional and will adjust your tax return to include your winnings and issue a bill with added interest and penalties. Of course, this bill wouldn’t account for your losses, which means you’d be paying a lot more than you’d have to pay if you’d filed taxes yourself.

However, if the IRS believes the failure to report was intentional, you could face lengthy audits and criminal charges for tax evasion. While rare, this outcome applies to those who knowingly fail to comply with tax laws.

If you report your winnings but cannot pay the resulting tax bill, don’t panic. The IRS offers payment options based on your financial situation, allowing you to settle your debt over time. A skilled Las Vegas bookkeeper can help you navigate these options while ensuring your records remain accurate and compliant.

Understanding gambling taxes: insights from Las Vegas bookkeeping experts

Here are some basics you need to know about gambling taxes:

1. Thresholds for reporting winnings

Certain thresholds determine when casinos or other establishments must issue a Form W-2G. Here are the key thresholds:

• Slot machines: Winnings of $1,200 or more trigger a Form W-2G.
• Keno: Winnings of $1,500 or more (after subtracting your wager) require a Form W-2G.
• Poker tournaments: Any net winnings of $5,000 or more result in a W-2G.
• Sports betting and other games: Payouts of $600 or more, where the winnings are at least 300 times your bet, also require a W-2G.

Even if your winnings are below these thresholds and you don’t receive a W-2G, you are still required to report all gambling income on your tax return.

There’s more: the IRS requires the payer to withhold 24% of your winnings for federal income tax^[3] if your winnings (minus the wager) exceed $5,000 and are 300 times the wager from certain activities like lotteries, sweepstakes, or parimutuel bets. 

This withholding doesn’t apply to games like slot machines, bingo, or keno, even if your winnings exceed the reporting thresholds for those games. However, you’re still required to report all your gambling winnings as income, regardless of whether taxes were withheld upfront. 

Keep in mind that 24% is the estimated tax—it’s not necessarily your final tax rate. Your total tax liability will depend on your overall income and tax bracket. A knowledgeable Las Vegas bookkeeper can help you calculate your accurate liability and ensure everything is filed correctly.

2. Losses can offset winnings

The IRS allows you to deduct gambling losses, but only up to the amount of your reported winnings. Here’s how it works:

• If you win $10,000 and lose $8,000, you can deduct the $8,000 in losses.
• If you lose more than you win—say $12,000 in losses against $10,000 in winnings—you can still only deduct $10,000, the amount of your winnings.

Losses include money spent on bets and the value of non-cash prizes wagered. However, these deductions require detailed records to be valid, which is why relying on professional bookkeeping services in Las Vegas can make the process much easier and more accurate.

3. You must itemize deductions

To deduct gambling losses, you need to itemize your deductions on Schedule A of Form 1040 under the section for “Other Miscellaneous Deductions.” Now, here’s an important point: the IRS wants things kept separate. 

You need to report the full amount of your gambling winnings as income and then list your losses as a separate deduction. You can’t just subtract your losses from your winnings and report the difference.

Also read: What is IRS Form 1040? (Overview and instructions)

4. Accurate record-keeping is essential

The IRS requires detailed documentation of your gambling activity. This includes maintaining a log that records the following for each gambling session:

• Date and location: Where and when the gambling occurred (e.g., “Bellagio Casino, Las Vegas, January 15, 2024”).
• Type of gambling: Specify whether it was slot machines, table games, sports betting, etc.
• Starting amount: The cash or chips you began with.
• Winnings and losses: Record each win and loss during the session.
• Ending balance: Document how much money or chips you had when you stopped.
• Supporting documents: Retain ATM receipts, betting tickets, win-loss statements from the casino, and any bank records.

You can use a dedicated notebook to log your gambling activity by hand. But for better record keeping, expert bookkeeping services in Las Vegas recommend using a spreadsheet or app to organize this data. Another option is to photograph tickets, receipts, and payouts immediately and store them in a cloud-based folder for easy access.

5. Get statements from casinos or gambling platforms

Many casinos and online gambling platforms provide win/loss statements. They are summaries showing your total bets, wins, and losses for the year. While useful, they’re not enough on their own. The IRS views them as supplemental evidence. 

You still need to back up these statements with your own detailed logs, especially if you gambled without using a player’s card or made cash bets. 

Using the session method

The IRS-approved session method is a lifesaver for gamblers and is recommended by all experts providing bookkeeping services in Las Vegas. Instead of recording every individual bet or spin, you calculate your net winnings and losses for each gambling session. A session refers to a continuous period of gambling at a specific location or platform without leaving and returning. 

For example:

• You walk into a casino, start playing slots with $200, and leave with $150. For that session, you record a $50 loss.
• On another day, you start with $300 and leave with $500. That session results in a $200 win.

The session method helps streamline record-keeping and ensures that individual small wins and losses don’t skew your reporting. It also avoids treating individual winning bets as taxable income if they occurred during an overall losing session. 

The bottom line

As a professional gambler, ensuring your tax filings are accurate is critical—not just to avoid IRS scrutiny but to ensure you’re claiming every deduction you’re entitled to. However, all this information might feel overwhelming, and trying to navigate gambling tax filings on your own can quickly become complicated. 

That’s where CoCountant comes in. We specialize in bookkeeping and accounting services for professional gamblers, helping you track winnings and losses with meticulous record-keeping so you stay IRS-compliant and financially secure.Our approach goes beyond basic bookkeeping—we ensure every bet, win, and loss is properly documented, help you separate personal and gambling finances, and guide you through legitimate tax deductions that maximize your savings. Whether you need organized financial records for tax season or year-round bookkeeping support, our Las Vegas bookkeeping experts have got you covered.

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