IRS - Gambling income and losses

The following guidelines apply to individuals who gamble casually and are not engaged in gambling as a business. All gambling winnings are taxable and must be reported on your tax return. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse racing, and casinos. It also encompasses both cash winnings and the fair market value of prizes such as cars and vacations.

If you receive certain gambling winnings or have winnings subject to federal income tax withholding, the payer must issue you Form W-2G, Certain Gambling Winnings. However, all gambling winnings must be reported on Form 1040 or Form 1040-SR (using Schedule 1 (Form 1040)), including amounts not reported on a Form W-2G.

Additionally, you may need to pay estimated taxes on your gambling winnings.

Gambling losses may only be deducted if you itemize your deductions on Schedule A (Form 1040) and maintain accurate records of both winnings and losses. The amount of losses you claim cannot exceed the amount of reported gambling winnings. Deductible gambling losses should be reported under "Other Itemized Deductions".

If you are a nonresident alien of the United States and need to report U.S. source gambling winnings, you must file a Form 1040-NR, U.S. Nonresident Alien Income Tax Return along with Schedule 1 (Form 1040). For additional guidance, refer to Publication 519, U.S. Tax Guide for Aliens, and Publication 901, U.S. Tax Treaties.

Generally, nonresident aliens who are not residents of Canada cannot deduct gambling losses. To determine whether your gambling winnings are exempt from federal income tax, see "As a nonresident alien, are my gambling winnings exempt from federal income tax?".

To deduct gambling losses, you must maintain an accurate diary or similar record of your gambling activities, including winnings and losses. Supporting documentation such as receipts, tickets, statements, or other records must be kept to substantiate the amounts.