Contributing expert Marissa Chien EA, answers:
You can claim actual gambling losses up to the amount of gambling winnings reported on your tax return. In other words, you can deduct all your losses up to the amount of your winnings, but no more.
Theoretically, say you're lucky enough to win a million dollars on a Wheel of Fortune slot machine. If you then turn around and bet it all on black on the roulette wheel and lose, you can report both on your tax forms with a big fat goose egg as your gambling result for the year. But you’d better have plenty of proof that you lost the roulette bet.
As a recreational gambler, you report your gross gambling winnings on line 21 of Form 1040 and your gambling losses on the Miscellaneous Itemized Deductions section of Schedule A. Professional gamblers report their gambling wins and losses on Schedule C. Again, it's imperative that you have proper documentation to support all your gambling losses, which means keeping a detailed diary of your results at the very least.
Marissa is co-author with Jean Scott of Tax Help for the Frugal Gambler, in which all of the intricacies of filing and keeping acceptable records are explained.
