RE: so how does he now prove he had losses
by JP Bill - 12/17/12 3:36 AM
In Reply to: Gambling by TONI H
so how does he now prove he had losses in order to claim them?
You may deduct gambling losses only if you itemize deductions. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return. Claim your gambling losses on Form 1040, Schedule A, as a miscellaneous itemized deduction that is not subject to the 2% limit.
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.
Document Your Deduction!
A running diary of the dates he gambled, the amounts wagered, amounts won, and any expenses incurred. You don't need the casino or racetrack to sign off on the record you keep, you just need to document how much you bet and the payouts you received.
If betting on the lottery is your thing, then hold on to your ticket stubs. The court is very clear that the burden of proof is on the taxpayer to demonstrate s/he sustained any losses.
Provided you've kept good records, you can deduct your gambling losses. But you don't do this by subtracting them from the total amount of your winnings. Instead, they are considered a "Miscellaneous Itemized Deduction." This means that your gambling losses won't reduce your tax bill unless they, and the other items you list under "Miscellaneous Itemized Deductions" (such as tax return preparation fees and home office expenses) add up to more than 2% of your Adjusted Gross Income.
Furthermore, you can only deduct losses up to the amount of your winnings- you can't deduct losses over and above the amount you win. For instance, if your total gambling winnings amount to $2000 and your losses add up to $2,500, the maximum amount you can list as a Miscellaneous Itemized Deduction is $2,000.
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