How to Pay Taxes on Gambling Winnings and Losses

 

Are you required to report your gambling winnings?

Yes, you must report all winnings on your tax return, whether the place that you gambled reports them to the IRS or not. For example, if you hit the trifecta on Derby Day, you are required to report the winnings as income.

You can, however, subtract the amount you wager from your overall winnings from a single bet. For example, if you win $620 from a horse race, but it cost you $20 to bet, your taxable winnings are $600 ($620 - $20 = $600) – not $620.

On the other hand, you can't "net" your winnings and losses from multiple bets. For example, suppose you make five separate $100 bets on the Super Bowl. You lose the first four bets, but you win $1,000 on the fifth one. You still must report $900 as gambling income on your tax return ($1,000 - $100 = $900). You can't subtract the four losing $100 bets from the amount you report as income. That is, you can't simply report $500 as income ($1,000 - $500 = $500). Although, as we'll discuss in a minute, you may be able to deduct the $400 of losses as an itemized deduction.

Also, cash is not the only kind of winnings you need to report. If you win a new laptop in a raffle, this counts as income, too. You are required to claim the item’s fair market value at the time you won it, which would generally be the amount you would have to pay for the item if you bought it.

Will you get a Form W-2G if you have gambling winnings?

Both cash and the value of prizes are considered “other income” on your Form 1040. If you score big, you might even receive a Form W-2G reporting your winnings. The tax code requires institutions that offer gambling to issue Forms W-2G if you win:

• $600 or more on a horse race (if the win pays at least 300 times the wager amount)
• $1,200 or more at bingo or on a slot machine
• $1,500 or more at keno
• $5,000 or more in a poker tournament

Table games in a casino, such as blackjack, roulette, baccarat, or craps are exempt from the W-2G rule.

This doesn’t mean you don’t have to claim the income and pay taxes on it if your winnings aren’t enough to warrant the tax form. It just means that the institution won’t send a Form W-2G.

TurboTax Tip:

If you’re a professional gambler, you can file Schedule C as a self-employed individual. This allows you to deduct costs associated with your gambling activity, including meals and travel expenses. However, it also means you’ll have to pay self-employment tax on your net income from gambling.

Can you can deduct your gambling losses?

You can deduct your gambling losses if you satisfy certain rules.

For instance, you have to itemize your deductions to claim your gambling losses as a tax deduction. This means you can’t take the Standard Deduction, which is often more than your itemized deductions.

In addition, starting with the 2026 tax year, the deduction for gambling losses is limited to the lesser of:

• 90% of your gambling losses for the year
• your gambling winnings for the year

(Before 2026, the deduction was only limited by your gambling winnings.)

For example, if you won $2,000 in 2026, but lost $5,000 that same year, your itemized deduction is limited to $4,500 ($5,000 x 90% = $4,500) or $2,000 (winnings for the year), whichever is smaller. So, in this case, the deduction is capped at $2,000, since that's the smaller of the two amount. You can’t use the remaining $3,000 to reduce your other taxable income. Instead, you have to claim $2,000 in income on Schedule 1 and then separately claim $2,000 as an itemized deduction on Schedule A.

If you’re a professional gambler

Does the tax picture change if you don’t just dabble in gambling, but actually make your living at it? Yes and no. Deductions from losses that exceed your winnings still are not allowed. The U.S. Supreme Court ruled in 1987 in the case of Commissioner vs. Groetzinger that deductions for losses cannot exceed the income from winnings.

If you regularly pursue gambling with the intention of making a profit, then it’s effectively your day-to-day job. Rather than claiming your winnings as “other income” on your Form 1040, you will file Schedule C as a self-employed individual.

This is an important distinction, because you can deduct your other costs of doing business on Schedule C, ultimately reducing your taxable income. For example, you can deduct the costs of:

• magazines, periodicals, and other data that relate to your gambling profession
• the business portion of your Internet costs, if you wager online
• meals and travel expenses if you attend tournaments or other gambling events

The downside of going pro is that you’ll have to pay self-employment tax (Social Security and Medicare) on your net income from gambling.

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