If you gamble, you must pay attention to your taxes.

Imagine this. You gamble during the year, lose money, and pay $13,898 in taxes on your gambling activity. This, or worse, could happen to you as a casual gambler. You will see, later in this article, how it happened in real life.

But first, here’s a quick look at the federal income tax rules for the non-professional gambler:

Your winnings are “above-the-line” taxable.1

Your losses are “below-the-line” itemized deductions and thus deductible, but (a) only to the extent of your winnings and (b) only if you itemize.2

Casinos and other payors of your winnings may have to report your winnings to the IRS on Form W-2G and send a copy to you.3

Example. Wilson, who is married, filing jointly, wins $15,000 and losses $40,000. Two things here:

His itemized deduction for his gambling losses is limited to $15,000.

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