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Ask the Slot Expert: Deducting Losses from Slot Winnings2 January 2013
By John Robison, Slot Expert™
Thanks for the kind words.
Deducting losses from slot jackpots isn't as easy as you describe. If slot jackpots were treated like business income, we would report our net winnings. So, if we were down $1500 when we hit $1600, we would report our true profit, $100.
But slot jackpots don't work that way. The IRS gets paperwork about certain winnings only. To pass the test that matches the income you declare with the income reported to the IRS, you have to declare the total of your W-2Gs as income on your 1040.
To deduct losses, you have to report them on Schedule A and you must itemize deductions and not take the standard deduction.
Keeping a record is good advice. The IRS website says that "it is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses."
Jackpots for all,
I've never had the pleasure of hitting a jackpot that was paid in an annuity, but here's how it works.
When you get your jackpot paid from an annuity, you get a W-2G for each payment. Gambling losses have to be deducted in the year in which they are incurred. You'll have to deduct all the money you lost going after that big jackpot in year one.
In year 2, you get another check and another W-2G. You can deduct any gambling losses you had in year 2 because you had reportable gambling winnings in year 2. The same goes for each year in which you get an annuity payment.
Jackpots for all,
Send your slot and video poker questions to John Robison, Slot Expert™, at firstname.lastname@example.org. Because of the volume of mail I receive, I regret that I can't reply to every question.