By / Tax Propaganda

Can You Deduct Gambling Losses on Your Taxes? Here’s What the IRS—and Your State—Wants to See

You hit the jackpot—or maybe you didn’t. Either way, if gambling played a role in your finances last year, the IRS wants a look.
Yes, gambling winnings are taxable. Every dollar.
But what about your losses? Can you deduct them?
Sometimes. But only if you do it right.
Can you deduct gambling losses?

The IRS Says Yes… With Conditions

Under IRS Publication 529, you can deduct your gambling losses—but only up to the amount of your winnings. That means if you won $5,000 and lost $7,000, you can only deduct $5,000.
But here’s the catch: You need to itemize your deductions. And you need evidence.
What kind of evidence?
  • A gambling diary showing where, when, and how you gambled, plus how much you won or lost.
  • Receipts, tickets, betting slips, or other documentation backing up what’s in your diary.
  • If you use a VIP player card at a casino, they’ll often send a year-end win/loss report—which helps, but isn’t enough by itself.
Just betting casually or playing online? You’ve got to keep even better records. No diary, no deduction.

What Is Form W-2G, and Why Does It Matter?

If you hit a certain threshold while gambling—like $1,200 at a slot machine or $1,500 from a keno win—the casino or track may issue you Form W-2G.
This form reports your winnings to both you and the IRS.
So if you receive a W-2G and don’t include that income on your return? The IRS will notice. And you may hear from them sooner than you’d like.

State Tax Rules Are a Whole Other Game

Here’s where things get complicated: federal rules and state rules don’t always match.
In Massachusetts, for example:
  • Gambling losses are only deductible from licensed Massachusetts casinos
  • Receipts, If you lost money at a casino outside the state? Too bad—those losses may not count, betting slips, or other documentation backing up what’s in your diary.
  • Online poker or betting through offshore sites? Most likely not deductible
  • But some online sports betting through licensed apps like DraftKings may qualify
Why the difference? States want to keep gambling dollars local. If you’re betting across state lines, your deductions could be denied.
For a deeper dive on this, check out this article on sports betting deductions in Massachusetts.

State Tax Rules Are a Whole Other Game

Simple. You can’t deduct them.
Even worse, if the IRS audits you and sees reported winnings without matching loss documentation, you could owe taxes on the full amount—even if you broke even or lost overall.
And once interest and penalties start piling on? That casino trip could cost you a lot more than you planned.

Feeling Overwhelmed? You’re Not the Only One

Let’s be honest: most people don’t think to save every betting slip or write down the exact time they sat down at a blackjack table.
It can feel overwhelming. But you’re not alone—and you can fix this before tax time hits hard.

Don’t Gamble With Your Taxes—We Can Help

If you’ve had a big year—whether you won big, lost big, or just placed a few online bets—you don’t want to guess your way through this.
We can help you:
  • Understand what counts as deductible
  • Review your W-2Gs and year-end casino reports
  • Organize your gambling records
  • Spot red flags before the IRS does
You’ve got one chance to get this right. Let’s make sure you do. Contact Laura Brown today for a confidential consultation