Gambling winnings are always taxable income. But what about gambling losses? The IRS does allow a deduction for gambling losses — but only under specific conditions that limit how much most taxpayers can actually benefit. Here’s what you need to know in 2025.
Yes, Gambling Losses Can Be Deducted — With a Catch
Under IRC Section 165(d), gambling losses are deductible, but only up to the amount of your gambling winnings. You cannot deduct gambling losses that exceed your winnings, and you cannot use gambling losses to offset non-gambling income. If you won $5,000 gambling and lost $8,000, you can deduct $5,000 — not $8,000. The $3,000 excess loss simply disappears and cannot be carried forward to future years.
You Must Itemize to Deduct Gambling Losses
Gambling losses are deducted as a miscellaneous itemized deduction on Schedule A — not as an above-the-line deduction. This means you can only benefit if you itemize deductions rather than taking the standard deduction. For 2025, the standard deduction is $15,000 for single filers and $30,000 for married filing jointly. Since most Americans don’t itemize, most gamblers cannot actually claim the deduction in practice, even if they have qualifying losses.
This creates an asymmetry that surprises many people: your winnings are taxable income regardless of whether you itemize, but your losses are only deductible if you itemize. Someone who wins and loses roughly equal amounts can still end up owing tax on the wins without being able to offset them with the losses.
What Counts as Gambling for Tax Purposes
The IRS broadly defines gambling income to include: casino winnings (slots, table games, poker); lottery winnings; horse racing and sports betting winnings; bingo and keno winnings; sweepstakes and raffle prizes; and online gambling winnings. Gambling losses from all of these activities can be aggregated and deducted against total winnings — you don’t have to match losses from blackjack only against blackjack winnings, for example.
Record-Keeping: The IRS Is Strict Here
The IRS requires you to maintain an accurate diary or similar record of your gambling activities. According to IRS Publication 529, your records should show the date and type of gambling activity, the name and address of the gambling establishment, the names of any people who were with you, and the amounts won and lost.
Supporting documents can include: casino win/loss statements (which most casinos will provide upon request); ATM receipts at the casino; credit card statements; wagering tickets or receipts; and bank records. Without documentation, the IRS can disallow the deduction entirely. Casino win/loss statements are particularly useful and many players don’t realize they can request them at the end of the year.
Professional Gamblers: Different Rules Apply
A small number of people gamble professionally — meaning gambling is their primary occupation and they pursue it with a profit motive. The IRS recognizes professional gamblers as a trade or business, which changes the tax treatment significantly. Professional gamblers report their income and expenses on Schedule C, can deduct gambling losses and related business expenses (like travel to casinos) against winnings, and are not limited to itemized deductions for their losses.
However, even professional gamblers have a limitation: they cannot use gambling losses to generate a net operating loss that carries over to other years under the rules established in the Groetzinger case and subsequent legislation. And the IRS scrutinizes professional gambler status carefully — you need to show regularity, continuity, and a genuine profit motive, not just a high volume of gambling.
State Tax Rules for Gambling
State tax rules for gambling vary significantly. Some states follow the federal approach (deducting losses against winnings on an itemized basis), but others are more restrictive. For example, Connecticut, Illinois, Indiana, Massachusetts, Michigan, Ohio, and Wisconsin do not allow a deduction for gambling losses at the state level, meaning residents of those states pay full state income tax on gambling winnings with no offset for losses. Always check your specific state’s rules.
Online and Sports Betting
With the legalization of sports betting in many states, more Americans are now receiving W-2G forms for gambling winnings. Online sportsbooks are required to report winnings above certain thresholds to the IRS. The same rules apply: winnings are taxable income, losses are deductible only up to winnings and only if you itemize. Keep records of every bet — your sportsbook account history can serve as documentation.
The Bottom Line
Gambling losses are deductible only against gambling winnings, only if you itemize, and only with good documentation. For most casual gamblers who take the standard deduction, the loss deduction provides no federal tax benefit — even while winnings remain fully taxable. Keep a gambling diary and request year-end win/loss statements from casinos and sportsbooks to protect yourself if you’re deducting losses.
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