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Question for the Money Doctors

Question submitted on Jan 13, 2014.

Question

I had a huge gambling issue this year. I won $335,000 and lost approximately $65,000. Are the win/loss statements admissable? Can you deduct cash advance fees? I know I have to itemize. Can I claim mileage?

Answer

There are two ways to go with gambling and what is subject to broad ranged business deductions such as mileage, airfare, hotels and other related business expenses. One is a business approach. In order to qualify to claim gambling activities as a business, all activity must be highly documented with receipts and time spent working must be fully devoted to gambling activities including a schedule of dates gambling and which locations gambling activities ocurred. Net winnings are subject to self employment tax whereas yearly losses are not subject to a loss carryover.

To address the most common form of gambling activity on your tax return,

Gambling deductions. Gambling losses are allowed as an itemized deduction and must be "fully" substantiated.

For those who are subject to Alternative Minimum Taxes, there is an additional wrinkle for deduction of losses in that they may be reduced.

Fully devoted and substantiation…I would not recommend if they have profit..since they will pay 15.3% SE tax along with income taxes….not a good option unless you are fully operating as a business…which is highly unlikely if not a detailed “professional gambler” and have books/records to support all activity.

Gambling losses are never carry-forward…they are limited and stay in the respective year substantiated.

Gambling losses are allowed and must be substantiated and claimed as Itemized deduction. If AMT does not effect, the outcome is a full deduction without a 2% limitation of AGI.

The only way the others get deducted is if you are in “Business” which is very strictly applied and would result in SE tax anyways.


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