According to the Internal Revenue Service website, “Gambling winnings are fully taxable” and they include winnings from “horse and dog races.” The site continues by stating, “The full amount of your gambling winnings for the year must be reported,” but there is a silver lining because if “you itemize deductions, you can deduct your gambling losses for the year,” however, you “cannot deduct gambling losses that are more than your winnings.” Phrased another way, you can reduce the amount of money the IRS will tax you by reporting your losses as part of your overall itemized deductions. So, if you are in the habit of tossing your losing tickets on the ground after each race, you might want to rethink that notion.
In order to cancel out your gambling losses, it “is important to keep an accurate diary or similar record of your gambling winnings and losses.” If you were not inclined to keep track of where, how and why you wagered on a given race, perhaps this will give you another incentive because in order to deduct your losses, “you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.”
So, start keeping track of where your money goes when you bet on horse races. It is just as easy to stuff your losing tickets in your pocket as it is to throw them in the trash. For those of you who wager online, your wins and losses are recorded for you. All you have to do is download the information. Such documentation is important if the IRS ever questions your claim.
Keep this mind: deductions for your losses are only available to you if you itemize your deductions. If you claim the standard deduction, then you can’t reduce your tax by your gambling losses.