Sports wagering and gambling losses can be deducted on annual tax filings, according to multiple tax services. However, there are certain rules and exceptions that must be accepted by the Internal Revenue Service (IRS).

According to TurboTax, a gambler can deduct their gambling losses but only if they’re used to offset income from their wins. A bettor cannot deduct losses without reporting his or her own winnings. Winnings and losses must be reported separately.

Bettors must report all gambling winnings on Form 1040 or Form 1040-SR, including winnings that aren’t reported on Form W-2G. With gambling winnings, the gambler can be required to pay an estimated tax on that additional income.

Gambling losses a bettor is allowed to deduct can never exceed reported winnings

The dollar amount of losses an individual is allowed to deduct can never exceed reported winnings. Anyone reporting gambling losses to the IRS must itemize income tax deductions on Schedule A (Form 1040).

For bettors to deduct their losses, they must keep an accurate record of their gambling winnings and losses in order to be able to provide receipts, tickets, statements, or other records to prove the amount of both winnings and losses.

In addition to Form W-2G and Form 5754, gamblers should keep wagering tickets, canceled checks or credit records, and receipts from the gambling facility.

If a person claims the Standard Deduction, they cannot reduce the tax via gambling losses. Individuals can claim their gambling losses up to the amount of winnings as “Other Itemized Deductions.”

Bettors can also deduct travel expenses to and from a casino, according to TurboTax. For that reason, it might be a better idea for high rollers to avoid online casino betting.

IRS does not allow taxpayers to subtract their losses from winnings and only report the difference

Additionally, the IRS prohibits taxpayers from subtracting their losses from winnings and only reporting the difference on their tax returns.

“Overall, if you have winnings, you can deduct the same day, the same type of loss that you have winnings, but not a net loss and not all different types of bets,” said Mark Steber, a tax information officer with Jackson Hewitt Tax Services, in an interview with WCNC’s Verify team.

According to the IRS, winnings from any gambling are taxable. Anyone who wins more than $600 will receive a form to fill out to report their winnings with the IRS.

Of course, this isn’t limited to sports betting. If a bettor visits a casino and hits the jackpot playing slot machines or wins big at the tables, anything over $600 must be reported.

“If you win more than $600, you’re going to get a W-2 with the amount you won and where you won,” Steber explained. “And if you win $5,000 or more, the government will take 24% upfront and then you certainly have to pay for that.”

Per the IRS website, gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos. Although sports betting isn’t listed, the activity is taxable as well. It includes cash winnings and the fair market value of prizes, such as cars and trips.