Can Gambling Losses Be Deducted from Your Tax Return?
Categories: Featured, Personal Finance
A subway hero explains
The New York City subway system is a scene of many oddities: preteen break dancers spinning on the floor, beggars clanging paper cups full of change, crazies ranting about conspiracy theories, tourists huddled around the map asking directions to Times Square, and commuters whose threshold for weird is so high that they barely raise their eyes from their Kindles.
But tax advice? That’s one of the few things you generally don’t see in Gotham’s labyrinthine tunnels. Last week, however, as I rode home weary from a day of tax writing, the subway tax advice barrier was broken.
A workman – his clothes and work boots scuffed and dirtied by a day of heavy labor – sat next to me scratching away at a $2 New York Lottery Cashword puzzle. Then, from the midst of the crowd that packed into the car at Rockefeller Center, came a booming voice.
“Excuse me, sir, excuse me,” the voice accosted the crossword gambler loud enough to attract the attention of the entire subway car. A tiny young man – barely old enough to have graduated college – emerged from the dense pocket of people and delivered an earnest piece of advice to the bewildered man scratching his card: “That’s tax deductible, you know.”
“What?” asked the man, as stunned as everyone else that the urban law of impersonal anonymity had been so grossly violated.
“The price of that ticket is tax deductible, you could get money back on your taxes,” the boy said loudly, perhaps so he could hear himself over the Beats (by Dr. Dre!) wrapped around his head.
“Yea well, I’m just having fun,” said the man, with an ironic smirk that was surely the envy of every Brooklyn-bound hipster on the train.
“Have fun on a lesser dime, that’s all I’m saying,” retorted the good tax Samaritan, a little hurt, before disappearing back into the crowd.
Was this underground tax advice elf right? Should all of you recreational gamblers out there be deducting the price of your lottery tickets and Cashword puzzles?
In a word: maybe. It’s true that gambling losses are tax-deductible. You can claim them right there on your Schedule A with all your other itemized deductions. But there’s a catch: you can’t claim more in gambling losses than you report in gambling winnings.
The good news is that gambling losses are a miscellaneous itemized deduction not subject to the 2% rule, which requires certain deductions to amount to at least 2% of your adjusted gross income (AGI) in order for you to claim them.
As with most deductions, it is imperative that you keep accurate records of your gambling winnings and losses in case the IRS decides to audit you. To deduct your losses you need to be able to show the IRS receipts, tickets, and statements documenting both your losses and your winnings.