Gambling winnings and taxes

I do taxes in Vegas and see too many people get blindsided by gambling winnings. If you win over certain amounts, the casino sends you (and the IRS) W2-Gs detailing the winnings. But they do not document losses. Which is a problem.

Gambling losses can only offset gambling winnings. They cannot be carried forward to future years and cannot be a deduction. Further, to offset winnings, you must itemize on your return.

Plus, you need a contemporaneous diary of gambling winnings, losses, dates, etc. if audited. Player’s card transcripts are not sufficient.

Pub 529 from the IRS is quite specific about keeping a diary.

Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings.

Your diary should contain at least the following information.

The date and type of your specific wager or wagering activity.
The name and address or location of the gambling establishment.
The names of other persons present with you at the gambling establishment.
The amount(s) you won or lost.

You can request the casino withhold taxes from winnings. They will do so at a flat 24%. Which is a whole lot better than owing at tax time.