If you are a professional gambler, you should generally file a Schedule C (Profit or Loss From Business) to report your gambling winnings and losses, as well as your related business expenses. Here's why and how:
Professional Gambler Filing on Schedule C
As a professional gambler, gambling is your trade or business. The IRS considers you self-employed if gambling is your primary source of income, and you pursue it with regularity and the intent to earn a profit. Filing on Schedule C allows you to:
- Report Winnings: Include all gambling winnings as gross income on Schedule C.
- Deduct Business Expenses: Ordinary and necessary business expenses (e.g., travel, meals, lodging, supplies) and gambling losses can be deducted, subject to the limitations of §165(d) under the TCJA for individuals. However, you cannot deduct more than your gambling winnings for the year.
- Self-Employment Tax: As a professional gambler, you will pay self-employment tax on your net earnings from gambling.
Schedule C Reporting
To report your gambling income on a Schedule C within the program, follow these steps:
- Log into your account
- Use the left side menu to navigate to the Federal then Income sections.
- Next scroll down until you see Profit or Loss from Business reported on Schedule C and select Begin or Add/Edit. You may select guide me or let me enter myself, whichever you are most comfortable with.
Report your expenses under the General Expenses menu item.
Reporting Gambling Losses
According to the IRS. "... individuals are limited in the amount of a deduction for wagering losses, including those expenses incurred in carrying on a wagering activity, to the amount of gains from wagering transactions. " Therefore, the total expenses AND gambling losses combined cannot exceed the gambling winnings.
Gambling losses will be reported on the Schedule C as Other Expenses. The taxpayer will need to make manual entries ensuring the net Schedule C does not result in a loss- the program will not do this automatically as professional gambling has a different set of rules. The taxpayer MUST keep records showing their expenses and losses to show the IRS should they request it.
What if I have W-2G winnings or am a non-professional gambler?
- W-2G Forms: Gambling establishments issue Form W-2G for certain winnings, such as large jackpots or poker tournament winnings.
- For non-professional gamblers, W-2G winnings are reported on Form 1040, Schedule 1 as "Other Income." Losses can be deducted only as an itemized deduction on Schedule A and are subject to the limitation of gambling winnings.
Important things to consider
- Record-Keeping: As a professional gambler, maintain detailed records of all gambling activities, including dates, locations, amounts wagered, winnings, and losses. Keep receipts, tickets, and any relevant documentation.
- Netting of Winnings and Losses: For professional gamblers, winnings and losses are reported on Schedule C, and the §165(d) limitation applies. You cannot deduct losses that exceed your winnings.
- TCJA Limitations: Under the TCJA, for 2018–2025, professional gamblers cannot deduct business expenses (e.g., travel, meals) beyond the amount of gambling winnings.