NEW YORK ( TheStreet) -- If you are a frequent visitor to the local track or casinos it is important to keep good records of your gambling winnings and losses. To deduct losses you must be able to provide receipts, tickets, statements or other records. If you play the lottery, keep your losing tickets. If you play the ponies, keep the daily track programs and all your losing tickets. And make sure the tickets you are saving don't have footprints on them!
Gross gambling winnings are reported as "Other Income" on Line 21 of your Form 1040. Gambling losses, allowed only to the extent of reported winnings, are allowed as a "Miscellaneous" Itemized Deduction. If you report gambling winnings of $10,000 on Line 21 of your Form 1040, the most you can deduct as gambling losses on Schedule A is $10,000. Allowable gambling losses are deducted in full and are not subject to the 2% of Adjusted Gross Income exclusion.
You will get a Form W-2G for each individual gambling win of $1,200 or more, including each win of $1,200 or more from a single slot pull.
Losses from any type of "wagering transaction" can be deducted against your reported gross gambling winnings. If you win in the slots, your deduction is not limited to losses from slot machines. You can deduct losses from the lottery, bingo, table games such as poker and blackjack, raffles, horse racing, keno, etc.Recent developments make it even more important to keep proper track of your gambling activity so you can minimize the tax cost of your winnings. The Tax Court, in TC Memo 2009-226 ( Ann L. Laplante v Commissioner of Internal Revenue) has agreed that a gambler's aggregate (i.e. "net") winnings for the day per casino should be included in gross income and not the individual winnings on a slot machine.