You Make the Call - Dec. 28, 2023

Question: Pepé is a casual gambler and went to the casino several times throughout the year. His total gambling winnings for the year are $3,500. On the advice of his accountant, he kept a detailed log of all the transactions related to his gambling. At the end of the year, he determined that he had $5,000 in gambling losses. Can Pepé use his gambling losses to directly offset his gambling winnings and report a net gambling gain of $0 on his tax return?

Answer: No. Pepé cannot net his gambling winnings and losses. Instead, he must report all his gambling winnings as income on his Form 1040, U.S. Individual Income Tax Return, using Schedule 1, Additional Income and Adjustments to Income, Line 8b.

He may then deduct the losses to the extent of the gambling winnings as a miscellaneous itemized deduction not subject to the 2% AGI limitation on Schedule A, Itemized Deductions, using Line 16.