Appendix B2

Recreational Gambler—Itemized

 

Form 1040 side 1

 

In this scenario, the taxpayers are not “penalized” for gambling. Their other itemized deductions, such as mortgage interest and real estate taxes, already put them over the standard deduction amount for a married couple. Therefore, the gross gambling winnings³ are “canceled out” by the deducted gambling losses⁵ and that amount is not included in their taxable income.

 

Form 1040 side 2

 

 

Schedule A (Itemized)

 

Although total gambling losses were $60,000⁴, you can claim only $50,000⁵, since you can count losses only up to the amount of the winnings.