Irs Gambling Sessions
There are plenty of reasons why you should keep a gambling diary or gambling log, but the best reason of all is simple—the IRS would be very unhappy if they decided to audit you and found out you didn’t have one.
A basic definition of a gambling session for a gambler tax payer is a period of continuous play without cashing out. However, a session cannot last more than one day. Gambler Tax Proof of Winnings and Losses. All gamblers, both professional and casual, need to keep appropriate records to document their wins and losses from gambling sessions. After all, even domestic gamblers have had to fight with the IRS about how to offset their wins and losses. In 2008, the IRS ruled that U.S. Citizens could measure their gains on a per-session basis.
A gambling diary, also known as a gambling log, is simply a written account of your wins and losses when you gamble. Some amateurs decide to keep them because they’ve gotten it in their head that they can lose a bunch of money gambling then write off all the losses on their taxes. Pro tip: You can only write off losses equal to wins.
Pros and regular gamblers keep them because of the Big House mentioned above. If you get audited by the IRS and you have a large amount of gambling income, they’re going to want to see some proof.
- You might also obtain affidavits from responsible gambling officials at the gambling facility. If you are a meticulous record keeper, the IRS recognizes the concept of gambling sessions that allows you to net the gains and losses during a particular gambling session. However, a gambling session is very limited in scope.
- If you anticipate gambling more this year, get on track with your record-keeping now. This will make your reporting all the easier in 2021 and reduce your risk of an audit. Keep track of how much you win and lose per gambling session at all times. You can do this manually (with a good old-fashioned ledger!) or electronically.
But what is a “large amount” of gambling income? What does a gambling diary or log even look like? Let’s dive in and take a look.
How Much You Need to Win for a Gambling Diary to Make Sense
For a gambling diary to actually make sense (which is to say, for it to be reasonable from a tax standpoint for you to start keeping one), you need to win over a certain amount each year. Below certain thresholds, you don’t need to report gambling income to the IRS.
Those thresholds are pretty straightforward. The first one is $600 or 300 times whatever you wagered. If you walk away with 1,000 bucks at roulette, then you’ll have to report the income.
The rules are a bit different for some other games though.
Poker tournaments, for example have a much higher threshold. You only have to report those winnings if you walk away with more than $5,000. Some fall in the middle. Real money Keno is treated differently at $1,500, and bingo and slot machines fall into the $1,200 range.
What makes things doubly confusing is exactly how you define “winnings.”
For Example:
If you sit down at a slot machine and win big on your first play, then keep playing until all that money is gone, do you have winnings in the eyes of the IRS? No.
In Your Gambling Diary, Track Wins and Losses by Session
If keeping a gambling diary meant I had to track every single play, I probably wouldn’t bother (and I doubt anyone else would either). Thankfully, that’s not how the IRS asks you to track your wins and losses.
Instead, the IRS wants you to track by session, where a “session” consists of any period of continuous play without cashing out. The only real caveat here is that a session can’t last more than a day.
So, what does that look like in practice? Let’s say you go to The Venetian, take a seat at a real money slot machine, and start playing. You win big on your first play, but you keep going until you’ve spent all your winnings (and then some). You’re there for an hour and a half, and when you’re done with the machine, you end up down $50—that’s a session.
For Example:Let’s say you then head over to The Mirage to play blackjack. You bust on the first few hands, but then you start to do alright. You walk away up $100—that’s a session.
So, even though you are technically only up $50, the IRS is going to want to see those sessions separated out. They want to see that you lost $50 on slots at one casino and that you won $100 at blackjack at another casino.
Why do they care about this? Because it affects your adjusted gross income. When it comes time to pay your taxes, even if you were way down for the year, those winnings are still counted as income. If you make $50,000 for the year at your full-time job, and you won $10,000 but lost $20,000, your net income was $40,000, but the IRS is going to count your adjusted gross income as higher than $50,000.
This can affect the taxes you pay each year and may reduce certain tax benefits. The important thing to walk away with is that you must report that income. If the IRS decides to throw you an audit party, and you haven’t kept track of that income in a gambling log, that party isn’t going to be much fun.
Here’s What You Should Track in Your Gambling Log
Okay, hopefully you’re convinced that you should keep a gambling diary to keep the IRS off your back, but what exactly should you be tracking in there, anyway? It’s pretty clear that you should be tracking your “sessions,” but what does that look like?
What the IRS Wants to See:Mostly are amounts won and what days they were won. But if you’re under audit, that may not be enough. However, when it’s time for you to report your own income on your taxes (and you’re not under audit), you’re probably fine with just the amounts and the dates (I recommend the dates just to keep things clear in your head).
Beyond that, if you want to play it safe and stay in the good graces of the IRS if they do come knocking, I would recommend that you write down dates and times at the very least, and definitely the location you were playing at.
You’ll also want to be writing down addresses, maybe some specific wagers (especially wagers that won big and were enough for the establishment to issue you a W-2G). And you’ll even want to consider noting the names of people you were with or employees if you have that info.
Irs Gambling Sessions
The point of all that is just to keep you triple safe and to provide the IRS the ability to talk to whomever they need to talk to and make sure you’re not trying to pull a fast one.
Don’t Forget Your “Verifiable Documentation”
Irs Gambling Sessions
The IRS isn’t stupid. They don’t want to just see your little diary and say, “Oh, okay, that’s probably sufficient.”
They also want to see “verifiable documentation.” Basically, they want to see proof that the $10,000 you claim to have won over the year actually ended up somewhere (and isn’t a figure you made up so that you could write off your $10,000 in losses for the year).
What does that look like? It looks like banking records that show you deposited a check. It looks like canceled checks or credit records. It looks like receipts, proof that this money you made actually got spent in some fashion.
All that being said, fear of the IRS is not the only reason you need to be tracking your gambling in a gambling diary. It can also be incredibly useful to you as a gambler.
Keep a Gambling Log to See How You’re Really Performing
Here’s why I really love keeping a gambling log. It can give you a realistic view of how you’re performing!
As human beings, we tend to struggle to have a realistic picture of what our skills actually are. That’s just a universal truth about life. When it comes to gambling, I believe it can get even worse because we get out of the mindset of paying attention to the math and numbers and get caught up in the fun and amusement of it all.
This is especially true for dramatic wins and losses. A big win can make it feel like we’re really doing well (or getting really good at playing poker) when the numbers might show that, overall, we perform far better playing real money blackjack (or maybe that blackjack is just more profitable for us in the long term).
Keeping a gambling log is more than just dates and times and winnings for someone who is serious about improving their skill and playing to win. I think the best gamblers out there are the guys and gals who are rigorous about tracking what they’re doing and seeing where they can improve.
However, what’s far more common is to see gamblers who basically have no clue what their skill level really is. When you put the screws to them, they usually can’t tell you more than anecdotes. Maybe one time, a few years ago, they won this huge pot. And another time they won this and that.
And yet these are the people who always seem to walk away down, who can’t quite seem to turn those few times they won into a consistent game.
Now, part of the problem with these types is almost certainly ego (or they’re just caught up in the magic of their few big wins and can’t see the bigger picture). But a gambling diary or gambling log could be of immense help to these guys and gals. It could help them improve their craft and really look at the facts instead of rolling the dice every time without a care.
Conclusion
Irs Gambling Session Rules
A gambling diary is critical for anyone who gambles regularly. It keeps the IRS off your back and serves as additional proof that you won and lost what you claimed you won and lost.
But more than that, it can serve as a way of tracking your true performance and improving your skills.
Irs And Gambling Sessions
Do you keep a gambling diary? Do you track anything I didn’t mention in your gambling log? Tell me about it in the comments!
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