My gambling losses exceed my winnings; however, when I enter the maximum allowed on the losses (equal to the winnings), it does not reduce the amount of federal tax due. So, the winnings increased the amount due, but the losses didn't decrease the amount due or cancel out the increase from the winnings. Why not?
Gambling losses are an itemized deduction and will only benefit you if the sum total of all your itemized deductions (ie. medical, mortgage interest, property taxes, charitable giving. ect) exceed your Standard Deduction.
To report your gambling losses, you must be eligible to itemize your income tax deductions on Schedule A. You are eligible to itemize deductions if your gambling losses plus all other itemized expenses are greater than the standard deduction for your filing status. This means that if you claim the standard deduction, you are still obligated to report and pay tax on all winnings you earn during the year. However, you will not be able to deduct any of your losses.
Since the gambling losses are an itemized deduction, there is not a dollar-for-dollar reduction.
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