Sometimes dealing with the IRS feels like rolling the dice at the craps tables in Vegas, because you never know what you are going to get.  In order to put the odds in your favor of winning against the house (the IRS) there are a few things you should know about when reporting your gambling winnings and losses to the IRS.

Every year, thousands of people try their luck at winning it big with the lottery and other types of gambling. It’s important to know that whether you play the ponies, play cards, or pull the slots, your gambling winnings are taxable. Fortunately, the IRS allows for gambling losses to be tax deductible up to your gambling winnings on schedule A. What this means is that you cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (again, up to the amount of winnings) as an itemized deduction.

For those that itemize, this deduction proves beneficial when it comes to paying taxes on your winnings. It’s important to remember that in order to take this tax deduction, the IRS requires you to keep accurate records of your losses. The IRS suggests keeping record in a diary of winnings and losses. 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

Certainly those of you who enjoy gambling in a casino do not want to carry around a diary with you the entire time. Thankfully, most all casinos have a players club which is free to join. Besides offers of free slot play and discounts within the casino, players club cards can track your activity for you when used appropriately. This can help eliminate the necessity of a diary within those establishments.

In addition to a win/loss diary, the IRS suggests keeping other forms of records including (but not limited to) wagering tickets, canceled checks, credit records and bank withdrawals. For more on gambling recordkeeping refer to IRS Publication 529.

Consult with your tax accountant to learn more on reporting winnings and losses from gambling activity.