Today I want to discuss gambling winnings and losses. All gambling winnings are taxable and should be reported on your federal and state tax returns (California State Lottery winnings are not taxable in California and don’t have to be reported on your CA return). Gambling losses are deductible as a miscellaneous itemized deduction not subject to the 2% exclusion, but if you don’t itemize your deductions you can’t deduct them. Gambling losses can only be deducted up to the amount of gambling winnings, so they zero out. Certain gambling winnings are required to be reported by the casino on a form 1099G and there may be withholding taken out, so you have to file your federal tax return to get the money back. Keep a log of casino gambling activities plus cashier receipts and horseracing tickets, etc to verify your gambling deductions, Here is a link to the IRS regarding gambling income and losses:
http://www.irs.gov/taxtopics/tc419.html
You can always call me if you become a millionare in the lottery or other gambling and we will discuss tax strategy and how much money you are willing to lend me.