? about Tax Deductions: Limited to amount of non-gambling income???

[Lego05]

The guy who told me this is a friend who graduated college about 2 years ago and now works as an accountant - his job is to do people's taxes and he said he was familiar with doing taxes on gambling winnings. He told me that you can't deduct gambling losses in excess of your other income. An example would be: So if my gross winnings were 40k and losses were 23k so net I made 17k I should report 40k winnings and deduct 23k as losses. However, according to this you can't deduct more than your other income so if I made 10k working part time at McDonalds or whatever I would only get credit for 10k in deductions and not 23k. This is worrisome for me because my income besides poker is $0.00 and this would prevent me from getting deductions and I'd be paying taxes on like 40k when I only made around 17 or 18k.

Does anybody have any information on this one way or another?

[broiler]

The guy who told you this is incorrect in the way that you state the rule. The only limitation on gambling losses is that you may not exceed the total of your gambling source income as a deduction.

Code section 165(d) is the specific section on the limitation of gambling losses, if you wish to look it up yourself.

[ChexNFX]

http://www.pocketfives.com/DD6E4B33-181C-4E60-80FA-433BE6A8AF8C.aspx

[Lego05]

From that article posted above this post:

"If you cannot itemize, you technically cannot offset those gambling winnings. It’s unfair but it’s the rule. If you have a substantial amount of losses, i.e. over about $10,000, then you may be able to itemize with just your gambling losses."

I guess this is basically what I was talking about. If you cannot itemize.... well... How do you know if you cannot itemize? The article doesn't seem to mention that. If I can't itemize I'm going to put very serious thought into not reporting and not paying taxes because it would just be way too much. And I don't want to file and then be told by the IRS that I can't itemize because then I'm screwed.

[Lego05]

Ok...from code section Title 26 sub-section A Chapter 1 Subchapter B Part VI 165 d:

"(d) Wagering losses
Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions."

Ok I guess if this is all there is to it things look fine. Thanks, broiler.

[Zele]

By "cannot" itemize, I think this article means "don't want to itemize" if your standard deduction would otherwise be greater than your itemized deductions. If your gambling losses (up to your wins) are greater than the standard deduction, then you should itemize.

I believe you can still itemize gambling losses even if you are subject to federal AMT, but I have heard this may not be the case in some states with their own AMT.

[lambchop]

The standard deduction for a single person is $5150. If your total gambling losses exceed $5150 then you will want to itemize (for the most part) but if they are less than this then you will want to take the standard deduction of $5150 thus making your losses of less than this amount unusable because you can not carry gambling losses forward or back. So "technically" you don't deduct your losses.