Substantiating your
losses a must with Uncle Sam
18 August 2000
By Mark Pilarski
Dear Mark,
You said on slot winnings more than $1,200, the
dreaded IRS form must be completed. Having never
won a jackpot of this size before until recently
at Stateline, NV, I am confused. It took that
much of my money to win that jackpot. How can I
offset the tax due on my win with my losses?
Lucille O.
You can offset your gambling losses against your
winning jackpot on Schedule A as an Other
Miscellaneous Deduction, but only to the extent
of your gambling win, not your income from a
9-to-5 job. Gambling winnings are reported on
tax form 1040 on the Other Income Line.
Reportable gambling winnings include lotteries,
bingo, raffles, horse and dog racing and all
casino games, legal or otherwise. Yes, even an
illegal bet on Denver in the Superbowl can be
considered a gaming win, or if you wagered on
Atlanta, a deduction.
Also, Lucille, you must be able to substantiate
your losses with flawless documentation. How? By
supporting your losses with a descriptive
gambling diary. You do this by keeping track of
all wagering tickets, canceled checks, bank
withdrawal statements made at the casino and
credit receipts as your proof. Granted it is
impractical to record every pull of the handle,
but by keeping a daily log of where you played,
how much you gambled and how much you won or
lost will be acceptable evidence for
substantiating your triumphs and tolls of
gambling.
By the fact that you have never won a big
jackpot before, I infer that you probably did
not keep factual gambling records of your slot
play. Don't despair; that is, if you use a slot
club card. Most casinos use some form of
computerized tracking system similar to the one
called the SMART system (Slot Marketing and
Revenue Tracking System) that IGT provides the
casinos. With these Smart systems, the casino
records your detailed playing history. Because
your play is tracked electronically when using a
slot club card, the casino should be able to
provide you with the documentation needed to
corroborate your losses.
One final thought, Lucille. Don't just get your
recorded play at the casino where you hit it
big. Go back to the other casinos where you have
used a slot club card and ask for a printout of
all your play on their machines for that year. I
state "that year," as gambling losses can be
used only to counterbalance gambling winnings
during that same tax period. They cannot be
carried forward or back to any other tax year.
Dear Mark,
I love to play Nevada Megabucks but can't afford
$3 every pull. Occasionally I try to second
guess the machine's rhythm of hot and cold
cycles and play accordingly. Obviously that
means playing less than $3 each time. Is this a
bad strategy? Rob S.
With all my parochial schooling, Rob, I always
thought the rhythm method had something to do
with birth control.
No progressive machine, Rob, should ever be
played without the maximum amount of coins
required. With all progressives, a percentage of
all coins played goes into the progressive
jackpot that continually grows until some lucky
soul hits it. But if you don't play the maximum
amount of coins, you can't retire from your
crummy job. Your jackpot with one coin inserted
would be a picayune $5,000-not enough to tell
your boss to "shove it." I suggest you look at a
progressive meter and consider what a nincompoop
you would be if you lined up the three
Megabucks' symbols but failed to risk two
additional tokens.
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