Assume you travel regularly to Las Vegas for recreation. During a year you pay $10,000 in total travel expenses and win $8000 gambling. Assuming you have appropriate records, can you deduct the travel costs against the gambling winnings leaving a net taxable profit of $0? Does it matter if your winnings are mainly due to one big hit on a slot machine versus small regular wins due to card-counting at blackjack?
Assume, if necessary, that there are other casinos much closer to you than Las Vegas.
According to IRS Publication 529:
"You must report the full amount of your gambling winnings for the year on your Schedule 1 (Form 1040). You deduct your gambling losses for the year on your Schedule A (Form 1040). Gambling losses include the actual cost of wagers plus expenses incurred in connection with the conduct of the gambling activity, such as travel to and from a casino. You can't deduct gambling losses that are more than your winnings. Generally, nonresident aliens can't deduct gambling losses on your Schedule A (Form 1040-NR)."
So based on that, I would say the answer is probably yes, as long as you itemize and have proper records.
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The answer is yes, but the end result generally isn't a net of $0. Given the facts presented, the net would only be $0 if you had enough other itemized deductions to exceed the standard deduction for your filing status. If less, part of the $8000 in allowable deductions would be consumed filling the standard deduction bucket.
Ira Smilovitz, EA Leonia, NJ
And my itemized deductions are maybe $4K, so that does mean a fairly large bucket to fill. However, I'm sure I will spend at least $12K on airfare this year (to make the elite status I want to achieve for 2022) and at least another $8K or so on hotel, meals, and car rental, so I guess that means that I could "afford" at least $12K in winnings. Although I have a lot of stuff on my tax return that is based on AGI (like Obamacare subsidy and threshold for Obamacare subsidies) so a dollar of income costs me more than a dollar of deductions saves.
(In case anyone wonders, I'm trying to learn to count cards at blackjack. That, and being a top-notch poker player, are the only way to leave a casino with more than you walked in with.)
If you became a professional gambler you might be able to do better (from a tax standpoing).
I was wondering about that. Is it possible to declare that my gambling as a trade or business? Are there specific rules that distinguish if from a hobby? I assume that if I play regularly on every day of each trip, with a profit motive, it would qualify. I wouldn't be so cheeky as to file a Schedule C with a net loss unless my cumulative profits over time were positive. It's pretty easy to demonstrate that when I'm counting cards at blackjack, I'm playing with a profit motive. I'm also way under my retirement plan contribution max, so I could deposit the profits in one of my retirement accounts.
========================================= MODERATOR'S COMMENT:
Here's a pretty good analysis of the applicable rules:
You must be a PROFESSIONAL gambler to deduct losses stated above. There are strict rules with enforcing the regs. If casual gamblers could deduct non loss expenses, everyone would be doing it. The only losses which CASUAL gamblers can deduct are the amounts actually lost on a game, slot machine, lottery, racing, etc. If audited, you will need some credible documentation also. Detailed info from link below:
Just to clarify, you can deduct even those losses only up to the amount you won. If you lost $30,000 and won $10,000 in a year, you can deduct only $10,000.
And of course, even that deduction is available only if you itemize deductions on Schedule A. But any winnings are always included in your taxable income, even if your losses exceeded your winnings -- which will be the case for most people; otherwise casinos would go broke.
"To deduct your losses, you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses."
Source:
For as long as I can remember court decisions have held and the IRS has enforced, that for a casual gambler (non-professional) travel, meals and lodging are deductible as an expense incurred for the production of income and as such fall under Code section 67 (misc. itemized subject to the 2% of AGI limitation) not Section 165 Losses. Starting in 2018, one can no longer deduct those 2% misc. items other than possibly on a state tax return.
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