Tax Rules for Amateur and Professional Gamblers
Gambling can be a fun pastime or a serious professional endeavor. Either way, winnings are taxable income. Yet, as recently reported by the Treasury Inspector General for Tax Administration (TIGTA), wagering income is significantly underreported. If you have winnings and don’t accurately report them, you could be subject to back taxes, interest and penalties. So it’s important to understand and follow the tax rules. But there also may be ways to minimize your tax liability while staying compliant.
Reporting Gambling Income
Under federal tax law, winnings from gambling activities, such as the following, must be reported as taxable income:
- Casinos,
- Lotteries,
- Raffles,
- Horse races, and
- Online betting platforms.
Gambling income isn’t limited to cash. You also must report the fair market values of prizes, such as cars or vacations.
The IRS requires gambling establishments to file Form W-2G, “Certain Gambling Winnings,” if the amounts meet certain thresholds, such as $1,200 from slot machines and $5,000 from poker tournaments. The form is submitted to both you and the IRS.
You’re required to report gambling income even if you don’t receive a W-2G. If you’re an amateur gambler, you’ll report it as additional income on Form 1040, Schedule 1.
Gambling losses can be claimed as itemized deductions, but only up to the amount of your gambling winnings. To claim this deduction, you must provide supporting documentation such as receipts, wagering tickets or statements from casinos.
Keep in mind that claiming a deduction for gambling losses won’t always save taxes. If your gambling losses plus your other itemized deductions are less than your standard deduction, you’ll be better off claiming the standard deduction. The following table summarizes the basic standard deductions for 2024 and 2025:
Standard Deduction 2024 2025
Married filing jointly $29,200 $30,000
Single (and married filing separately) $14,600 $15,000
Heads of Household $21,900 $22,500
Slightly higher standard deductions are allowed for those who are 65 or older or blind. With today’s high standard deduction amounts, there may be a greater chance that your standard deduction will be higher than what you can deduct if you itemize.
Professional Gamblers
If you gamble as a profession, the tax rules are a little different because your gambling activities are treated as a business. To qualify as a professional gambler, you must demonstrate that gambling is your primary source of income and that you engage in it with continuity and regularity. Factors such as time spent gambling, skill level and dependence on gambling income are considered.
Professional gamblers report their winnings and losses on Schedule C, “Profit or Loss From Business,” instead of Schedule A. They also can deduct gambling-related expenses, which may include:
- Travel costs to and from gambling establishments,
- Lodging expenses for overnight stays related to gambling activities,
- Meals during gambling trips (subject to standard IRS limits, such as being only 50% deductible), and
- Fees for entering tournaments.
These deductions are available even if they exceed the amount of gambling winnings. This creates a business loss that can provide tax benefits, subject to additional tax rules. (Contact your tax advisor for details.) Meticulous records are necessary to substantiate deductible expenses.
3 Tax Tips
Here are some tips to help ease tax compliance:
1. Maintain a detailed log of your gambling activities. This log should include:
- Dates and locations of gambling activities,
- Types of wagers, and,
- Amounts won and lost.
A log will help ensure you accurately report winnings and don’t miss out on claiming deductible losses, if applicable. Having this substantiation can also be beneficial if you’re audited. Keep in mind that a log kept contemporaneously generally holds more weight with the IRS than one constructed later.
2. Keep and organize relevant receipts, statements and other documentation. Thorough documentation is critical, especially if you’ll be deducting gambling losses or gambling-related business expenses.
3. Plan for tax withholding and estimated tax payments. Remember that income taxes must be paid throughout the year via withholding or estimated payments. If the tax you owe on the April 15 filing deadline exceeds what you paid during the tax year through withholding and estimated payments, you might be subject to interest and penalties.
Gambling establishments are required to withhold federal income taxes from certain winnings, which will help reduce your risk of interest and penalties. For winnings without withholding, or if you anticipate substantial gambling income, consider making estimated tax payments or requesting an increase in withholding from your paychecks.
Don’t Roll the Dice with the IRS
The complex tax rules for gambling income can be confusing. Not properly reporting gambling income can result in back taxes, interest and penalties. And not deducting expenses or losses you’re entitled to claim can lead you to pay more taxes than necessary. Consult your tax professional to help ensure you follow the rules and potentially identify tax-saving opportunities.
Tax Treatment of Comps
Both amateur and professional gamblers often receive complimentary goods or services from gambling establishments, such as free hotel stays, meals or event tickets. The IRS generally considers the fair market values of these items to be taxable income.
Amateur gamblers must report comps on their personal returns as part of gambling winnings. Professional gamblers report comps as income on Schedule C. Your tax advisor can help you accurately calculate the fair market values of comps to include on your tax return.
Copyright 2025
This article appeared in Walz Group’s February 10, 2025 issue of The Bottom Line e-newsletter, produced by TopLine Content Marketing. This content is for informational purposes only.
