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TheStreet Open House

Winning Gamblers Still Lose If They Don't Keep Track for Taxes

Just as people uses their car for business must keep a record of business mileage, a gambler must keep a record of daily activity. A simple pocket notebook will do. You would indicate the date, location, names of casinos visited and the net activity from each casino for each type of gambling activity for the day.

You must keep a separate recording of each type of game being played at each casino (for instance, slot machine and table games such as blackjack and poker), reporting the net activity from each game. In the case of a table game, the reporting requirements state that you must also make a note of the table number.

Say you play slots for an hour and blackjack for an hour. Each must be reported separately in your log. All of the slot play is netted; all the blackjack play must be separately netted. Losses from one game could not reduce net reportable winnings from another game, even if they occurred in the same casino on the same day.

If I won net $1,000 in blackjack and lost net $500 in slot play from one visit to Bally's I would need to report $1,000 on Page 1 of the Form 1040, but I could deduct $500 as losses on Schedule A.

When you enter a casino keep your gambling money separate -- in separate pockets or separate envelopes, and one for each gambling activity (for instance, slot machines and table games).

Let's say you spend a weekend in Atlantic City. On the morning of July 16 you began your gambling at Bally's Wild West on the Boardwalk. Make the following entry in your notebook:

7/16/2013 -- Atlantic City, N.J.
Bally's Wild West -- slot machines
Beginning cash = $200
Start time: 10 a.m.
End time: 1 p.m.
Ending cash = $315
Net win/(loss) = $115

You may have win $1,300 in one slot pull while at Bally's on July 16, but you put $1,185 back into the machines before leaving the casino. So instead of $1,300, as appears on the Form W-2G you got from Bally's, you would include only $115 as actual gambling winnings on Line 21 of your 1040.

On the same day you also gamble at Caesar's Palace. You would make the following entry:

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