How High Rollers Handle the IRS

Q: Can gambling winnings be exempt from IRS tax?

A: Winnings are not tax-exempt. But only net winnings – wins minus losses, should be taxed.

Here is the general rule: Gambling winnings are taxable income. They are not exempt, not even at a function promoted by a tax-exempt organization.

However, generally speaking, gambling losses are tax deductible only to the extent of gambling winnings. However, the deduction for those losses must be included with “itemized” deductions. Losses are reported on the Schedule A (Form 1040), Itemized Deductions. But if you don’t itemize, you cannot deduct those losses.

Meanwhile, you still must report all of your winnings as taxable income.