The Gambler's Quick Reference Guide to Taxes and the IRS
1. The wager must be legal. This seems like a no-brainer, but you would be surprised.
2. Gambling winnings are taxable income, and you must report them, period. This includes winnings from lotteries, horse and dog races and casinos and the fair market value of prizes are all taxable by the IRS. The rules are somewhat complicated, but the casino will keep you honest by issuing you a W2-G if you make more than $1,200 in slots, $1,500 in Keno, $5,000 in a poker tournament or the payout on some other wager exceeds $600 and is more than 300 times that wager. They may even withhold some of your winnings meet this criteria.
3. You may deduct gambling losses if you itemize, but they may not exceed gambling winnings. I had a buddy in college that kept all his losing tickets, but he never had any winnings. Sorry, doesn't work.
4. Keep a journal and your receipts on winnings and losses if you do any significant volume of gambling. You really will need a written record to make a case for your offsetting losses if you are ever audited.
These are only a summary of broader rules, but you get the picture. If you are facing an audit where gambling winnings are at issue, or your gambling has caused a shortfall in your ability to pay your taxes, call locally licensed tax lawyer, Travis Watkins, at 1-800-721-7054 today. I have helped many just like you put their finances back together from these shortfalls.