We shunted this question right over to Jean Scott, the world’s leading authority on gambling and taxes and co-author of Tax Help For Gamblers. It's also available as an e-book, for instant delivery and at a pretty discount.
Here’s what Queen Jean has to say about casino benefits and taxes.
Boy, you know how to throw a lot of complex issues into one short sentence. It took us many pages to discuss these subjects in Tax Help For Gamblers!
Some taxpaying gamblers consider all the items you mention to be "comps." However the subject of comps is a huge gray area when it comes to taxes. Sometimes casinos issue 1099s for "large" comps, such as cruises and cars, but there’s no uniformity of casino policy when it comes to issuing paperwork.
However, most comps rarely generate a 1099. But that doesn’t give us any guidance. The problem is that none of these subjects is directly addressed in IRS publications and there’s no standardized interpretation of these issues by tax preparers or even IRS employees.
Most professional tax preparers would probably advise clients that cashback is gambling income. Free-play is not as clear-cut, but most would say that if you do count it, the amount should be what you have left after you’ve played it through once, as required by the casino, not the initial amount.
From an IRS publication: Your tax liability depends on your particular facts and circumstances. This is why, over and over, we emphasize in the book that you should take your questions to a knowledgeable tax profession who can analyze your particular gambling circumstances.
