You must report all of your gambling income and comps regardless of whether or not you were issued a W-2G. Gambling income is subject to ordinary income rates but may be offset by gambling losses.
Gambling losses may be written off as miscellaneous deductions on Sch A for taxpayers who are able to itemize. Keep in mind that the deduction for losses are limited to your winnings for the year. Excess losses may not be rolled forward to future years. Meals, lodgings and other expenses are not deductible unless you qualify for professional gambler status.
As a professional gambler, The TCJA of 2018 limits the amount of deductions that may be claimed. Under the new tax code all gambling deductions for a professional gambler are limited to your winning for the year. Professional gamblers may no longer claim a loss on their tax returns.
There is a high bar to pass in order to qualify as a professional gambler. Professional gamblers are those who pursue gambling activities “full time, in good faith, and with regularity, to the production of income for a livelihood, and … not [as] a mere hobby,” according to the Supreme Court. In that case, the gambler—who was found to be a professional—spent 60 to 80 hours a week trying to earn a living by placing pari-mutuel bets on dog races. He had no other job.
Courts consider the nine hobby loss factors when determining whether taxpayers are professional gamblers (i.e., conduct their gambling activities as a trade or business)
Here are the factors that tend to be associated with professional gamblers:
They conduct their gambling activity in a businesslike manner (such as by keeping extensive and orderly records).
They study gambling strategies and consult with gambling experts.
They spend 40 hours a week or more gambling.
They make a profit from gambling during the years in question.
If you are a professional gambler, or are unsure please feel free to contact us and we will gladly discuss your best option for filing your tax return.