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Losing Bets Offset Taxes?

Discussion in 'The Sports Book' started by NoMayo, Nov 5, 2012.

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  1. NoMayo

    NoMayo Tourist

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    Hello,

    I have heard that you can use proof of lost wagers to offset taxes on gambling winnings. Here are the specifics: I won just under 18k on a hand of LIR Poker. To collect my winnings, I had to provide a SS number and address. I was told I would be sent a W-2. (This happened outside of Nevada. Not sure if it matters, but it might save time for people who were going to ask.) I expect the W-2 will arrive in January. It is my understanding that you can use proof of lost wagers to offset the federal income tax on your winnings.

    So, have any of you used losing sports bets to offset taxes? Also, can you use these sports wagers as a cheap way to save in the long run? For example, you bet both sides at -110. Risking 550 to win 500. One bet loses. The other wins. One bet will return you your wager plus your 500 in winnings. The other bet loses 550. Overall, you have lost $50. But, haven't you just gained a $500 deduction in the taxes you owe on your previous big wins?

    Any answers are greatly appreciated. Thanks!
     
  2. leo21

    leo21 VIP Whale

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    I believe they qualify as a gambling loss just like casino bets and losing lottery tickets. But you can only write off losses if you have a win and if you itemize deductions.
     
  3. gpenguins67

    gpenguins67 High-Roller

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    The way i see it your logic is correct. As long as you have the proof of a loss thats all you would need in case you ever get audited by the IRS. Whether it is old lottery tickets, sports bet slip, or a win/loss statement from a casino. It just has to be from the same year.
    I know you could write off your losses for the federal taxes last year but depending on what state you live in you may not be able to write it off for state taxes. Last year RI changed its policy and i couldnt write off my losses for my state taxes.
    Also keep in mind that your 18k winnings gets added to your total gross income for the year and it could potentially move you up to the next tax bracket (although 18k may not be enough to make enough of a difference). But again that happened to me last year where i got bumped to a higher tax bracket and I had other write offs for my home which i could not use.
     
  4. mike_m235

    mike_m235 Tourist

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    This is correct. You have to be filing schedule A to claim losses, which means you have to have enough other deductions to make itemizing worth your while in comparison to the standard deduction. If you itemize, then you deduct your losses up to the amount that you won as a miscellaneous expense.

    There are also a lot of rules for how you have to account for your gambling losses -- basically you have to have been tracking them with quite a bit of detail.

    IRS publication 529 covers the rules for gambling losses.
     
  5. BackInVegas

    BackInVegas VIP Whale

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    a little more

    Yes you can deduct losses with a MAJOR CAVEAT. You must itemize. Use Schedule A.

    You bet $550 on one side
    You bet $550 on the other side

    You win $550 + 500 = 1,050.
    You lost $550.

    You must claim the $500 in winnings so you can deduct the $550 in loss. Net $50 loss.

    BUT!!! You can only deduct to how much you won. So, your deduction is NOTHING.

    You only won $500 so you can only deduct $500 in losses. It is a wash. You won't pay taxes on the winnings, but you gave $50 to the casino. Your wallet won't last long when you use this strategy.


    What you need to do is:

    Do you have other Sportsbook tickets that show a loss? Do you have a printed record that is completely fudged by the casino of what you have theoretically gambled? The casino will understate your action because they do not want to award you more COMPS and they don't want their taxes to be higher.

    Do you play the lottery(ies)? You can add those as a loss. keep those losing tickets.
    Do you play the ponies in your home state? Keep those losing tickets.
     
  6. mike_m235

    mike_m235 Tourist

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    My casino records tend to overstate my losses. And it has nothing to do with comps, because your comps are based on theoretical loss, not actual. So I'm not sure where you're getting your information.

    Also, your wins and losses have nothing to do with their tax records. It's how much they take in total, not per individual. So if you think they're changing your personal number for tax purposes, that's just silly. Incompetence, maybe. Conspiracy? no.
     
  7. BackInVegas

    BackInVegas VIP Whale

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    duly noted Mike

    Do most of your comps come from slots machines or Sportsbook? Mine come from the Sportsbook and my winnings and losses are not theoretical. They are actual.

    Poker Room gambling is completely theoretical. I would think Slot machine play should be close to being actual if someone is using a players card. But for a gambler that is NOT using a players card, then it becomes theoretical.

    If you read Natedogs reports, he also reports how the casinos UNDER report his action. He goes back and fights with them all the time.

    My statement about the casinos under reporting to lower their taxes is based on my belief that if you report a lower income you pay a lower tax. I am sure somehow someway that a casino just might use the massive data they have on their lack of revenue from their customers to justify NOT paying taxes. Maybe I am silly in thinking that businesses try not to pay taxes though.

    I am not here to argue. It was just a message board forum.

    Have a great day.
     
  8. mike_m235

    mike_m235 Tourist

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    The problem with your thought about underreporting is that you're looking at it as an individual. The casino is going to look at it as a total...it's pretty easy to know how much money the casino had at the beginning of the day and how much they have at the end. That's going to be their win or loss. Certainly individuals contribute to it, but fudging that number is a bit more serious than just adjusting some player's record.

    Comps are based on theoretical losses. For a very high end sports bettor, maybe it's different and if you have some massive losses, maybe they'll comp you. But if you bet a grand on a game with a -110 line, the book is expecting to win 50% of the time, and your theo is half the vig.
     
  9. shifter

    shifter Degenerate Gambler

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    sure, that's how it's supposed to be, but maybe that winning ticket got destroyed in the washing machine and you forgot about it and all you claimed was the $550 loss with a ticket to back it up. not recommending anything, i'm just saying, it could happen.
     
  10. 44inarow

    44inarow VIP Whale

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    Except you can only deduct losses to the extent of your winnings. So if you're not reporting a win, you can't claim a loss.

    [This is not legal or tax advice]

    EDIT: Sorry, didn't realize we were talking about generating offsets for a preexisting big win. You're talking about spending $50 for a $500 reduction, so depending on marginal tax rates this could, in theory, result in a net gain for you. But on a practical level I have a feeling this would raise red flags if anyone actually looked at your return.
     
  11. NoMayo

    NoMayo Tourist

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    First, thank you to everyone for the responses.

    Raising red flags is what concerns me. Now, theoretically, I lose the envelope with all my winning sports wagers and manage to keep the losing tickets. I get the W-2 from CET for my LIR winnings and use the losing tickets to offset the taxes. My thinking was red flags would be thrown up immediately. I've never paid taxes on winnings in the past, and the first time I do, I'm offsetting them with these losses.

    I suspect the wisest thing to do is bite the bullet and give to Caesar what is his. (Uncle Sam, that is. Not the casino.)
     
  12. 44inarow

    44inarow VIP Whale

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    Exactly. Unusual and easy-to-fudge deductions often generate attention; home office deductions are probably the most common one, since so many people take them incorrectly, but offsetting gambling winnings is something that gets looked at as well. This isn't to say that you shouldn't use legitimate offsets if you have them (especially those that you can back up with records like losing sportsbook tickets), but trying to game things in the way you're thinking of probably isn't the best idea.

    Again, not legal or tax advice.
     
  13. shifter

    shifter Degenerate Gambler

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    Anytime you offset gambling wins with losses you're inviting an audit. But if they're legit and it saves you a bunch of taxes to pay, why pay more than you have to?
     
  14. 44inarow

    44inarow VIP Whale

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    Because in this scenario getting audited could come at substantial cost. Not only will this raise a "these deductions are suspicious" red flag, but that could in turn raise a "maybe there are unreported gambling winnings from prior years" red flag, which brings with it all sorts of new annoyances.

    For the record, I'm not saying it's not possible to get away with, and I'm definitely not advising or passing judgment on whether or not anyone "should" or "shouldn't".
     
  15. NoMayo

    NoMayo Tourist

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    Right. In previous years, I have lost. This year, I'm coming out significantly ahead. And with this W-2, I'm thinking it might just be better to pay my taxes and not call any attention to myself. I'll be heading to Vegas on Saturday. I guess I'll just have to win some more.
     
  16. 44inarow

    44inarow VIP Whale

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    That's the spirit!
     
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