There are laws require that you declare your winnings in games including gambling as part of your income. But what about the losses? How do you account for the losses you made in gambling when it comes to tax filing?

It wouldn’t be fair to be taxed for the winnings and not account for the losses. Gambling after all is like running a business but with considerably lower chances for success. It’s easier making money by investing in a business compared to spending money on slots, dice, poker, or baccarat.

Based on data from H2 Gambling Capital, as reported on The Economist, global gambling losses in 2016 amounted to $385 billion with Australia topping the list of countries with the highest losses. By the way, loss here refers to the losses of players or the gains of gambling operators.

Source: The Economist, citing data from H2 Gambling Capital (website screenshot, fair use)

Tax Significance of Casinos, Online Casinos in Particular

It’s worth discussing the idea of tax on casino winnings mainly because online gambling is something common nowadays. Based on numbers from Statista, the online gaming market will have doubled in 2018 from its figure in 2009. The forecast is that it will become a $51.96 industry by 2018. A 2016 survey conducted by Nielsen Scarborough found that nearly 83 million Americans went to a casino in the past 12 months. That’s a truly massive number representing gamblers in the US alone. However, it is expected that this number of gamblers who visit physical casinos is bound to shrink over time as more prefer to play at online casinos.

Online casinos provide convenience any gambler would surely appreciate. It allows playing without the limitations of location and time. It is a major advantage for modern gambling. Some may doubt its reliability, questioning the fairness of the games being offered, but with the help of systems like random number generation and provably fair testing, players are assured that the games they play are not being manipulated. There are companies or institutions that provide certifications for random number generation to vouch for the reliability of online casinos.

The games on online casinos have also been standardized to establish credibility. Most online casinos nowadays rent or buy their software from renowned gaming service providers like Playtech, Microgaming, Realtime Gaming, Amaya, Softswiss, and International Game Technology. The use of games from this well-known companies makes it easier for players to trust casinos as compared to offering completely new in-house developed games.

Each casino must produce its own program, based on an analysis of the risks presented by the casino’s products and services. An effective AML program is designed to prevent the casino from being used to facilitate money laundering and terrorist financing, and must be based on an assessment of the possible risks of those things happening. The amount of gambling losses you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000, or carry it forward to future years.

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Casinos have all kinds of secrets they don’t want you to know. But over on Reddit, thanks to AMAs and other popular threads, some casino insiders have shared their stories. And we’ve scoured. The Trump Taj Mahal casino broke anti-money laundering rules 106 times in its first year and a half of operation in the early 1990s, according to the IRS in a 1998 settlement agreement. The violations date back to a time when the Taj Mahal was the preferred gambling spot for Russian mobsters living in Brooklyn, according to federal.

Moreover, online casinos have invested time, money, and effort in improving the looks and usability of their websites. Online casinos now look indubitably better than how they looked in the past. They also employ better technologies to ensure a smoother playing experience. Flash has slowly been abandoned in favor of HTML5. At present, it is estimated that only around 4.6% of all websites are still using Flash. The same dwindling numbers can be observed when it comes to Flash use in online casinos.

Online casinos have also been designed to be accessible across multiple devices, from desktops to laptops and mobiles including tablet computers and smartphones. Online gambling operators have made sure that their online casinos are easily accessible using mobile devices, which is obviously an acknowledgment of how big the number of mobile internet gamblers is. As of February 2017, it was estimated that mobile internet access (not including access through tablet computers) accounted for 49.73% of the total page views across different parts of the world.

It’s not surprising that online casinos put emphasis on improving their looks, usability, accessibility, overall performance, and distinctiveness. They seek to provide a better casino experience that lets players enjoy quality games, snappy performance, reliability, intuitiveness, and the assurance that they will be paid of their winnings. 888 Casino, for example, has recently introduced a brand new sleek website design that makes it a one of a kind casino online.

Online gambling has come a long way and is being patronized by a growing number of people worldwide. While problem gambling is still the top issue associated with it, many are now recognizing that taxation of winnings is also an important issue to raise. After all, online casino winnings are still earnings worth subjecting to taxation. That’s why it’s worth discussing the tax implications of online casino winnings as well as the corresponding losses.

Deductible to a certain extent

The good news is that your gambling losses are actually deductible from your taxable income. Regardless of where you won and lost, be it in a traditional brick and mortar casino or in an online casino, you can deduct the losses you made from your taxable income. It does not matter if you gambled at a traditional brick and mortar casino where you made successive wins or you lost money at a dubious online casino. Your winnings and losses are supposed to be accounted for based on tax laws and regulations.

The main idea here is that you can subtract your gambling losses from the amount you won. Of course, you can’t just directly deduct the amount of your losses from your tax due. It’s similar to how you compute taxes for your business income. Your expenses and losses are deducted from your gross income first before multiplying the applicable tax rate to come up with the due amount of tax. The winnings are comparable to the gross income (in business) while the losses are comparable to the expenses and the actual losses of a business.

It’s important to remember, though, that this deduction can only be allowed if you are qualified for itemized deductions. You need a detailed listing of your winnings and losses to come up with the net amount that will be subjected to the tax rate. These details are to be listed under Other Income and Other Miscellaneous Deductions sections of Form 1040. If you opt for the standard deduction, your gambling or casino losses will no longer be subtracted from your total taxable earnings.

Source: IRS

Itemized deduction vs standard deduction

Taxpayers automatically qualify for standard deduction except when the itemized deductions they claim are greater than the standard deduction. Tax authorities are responsible for deciding if you qualify for standard or itemized deduction. You will not be compelled to choose either standard or itemized deduction, though. If you find standardized deduction more convenient, you will not be forced to choose itemized deduction even if you qualify for it. Around a third of the taxpayers in the United States use itemized deduction.

Naturally, you will have to choose t

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