Can I deduct my non-winning lottery tickets as gambling losses on taxes? What about scratch-offs?

Wait, so if I've only won like $50 this year but spent way more, I can only deduct $50? That seems unfair when casinos make so much money off people. Also, what counts as proof of winning? I don't always get receipts when I win small amounts.

That's correct - you can only deduct losses up to the amount of your documented winnings. The tax code sees gambling as a recreational activity, not a business expense, which is why there's this limitation. For proof of winnings, it depends on the amount. For prizes of $600 or more, you should receive a W-2G form. For smaller winnings, keep whatever documentation you can - ATM receipts showing withdrawals at casinos, bank statements, winning tickets, etc. A personal log is also valuable, especially if it's consistent with your other records. The more documentation you have, the better positioned you'll be if questioned.

That sounds interesting but I'm curious - does it work for online gambling too? I play poker online and have all my statements, but categorizing wins/losses has been a nightmare.

How does it handle state vs federal differences? I've heard some states have different rules about gambling deductions compared to the IRS rules.

For online gambling, absolutely! You can upload your online poker statements and it'll parse through them to categorize everything correctly. It's actually even more accurate with digital records than physical tickets since it can capture all the transaction details. As for state vs federal differences, that's one of the things that impressed me most. It shows you both the federal guidelines and then any state-specific rules that apply based on your location. For example, in my state, there are additional documentation requirements that the federal return doesn't need, and taxr.ai flagged those for me specifically.

How does this even work? The IRS phone system is literally designed to be impossible to navigate. What does Claimyr do that's different from just calling myself?

Yeah right. Nothing gets you through to the IRS these days. They don't even answer like 80% of calls. I'll believe it when I see it.

It essentially navigates the IRS phone tree for you and stays on hold in your place. When a real person finally picks up, it calls your phone and connects you directly to that agent. It's like having someone sit on hold for you for hours so you don't have to. They use some kind of technology that keeps the connection active and monitors for when a human actually answers. I was super skeptical too, but when my phone rang and I was instantly connected to an actual IRS representative without sitting through the hold music for 3 hours, I was completely shocked. It literally saved me days of frustration.

Does anyone know if the IRS actually accepts digital records? Like if I take photos of all my tickets instead of keeping the physical ones? My wife is threatening to throw out my "collection" of losing tickets lol.

Digital records can work, but physical records are still preferred. If you do go digital, make sure your photos clearly show the entire ticket including date, serial number, and price. Store them organized by date and type, and back them up securely. I'd recommend keeping the physical tickets for at least 3 years (the standard IRS audit window) if possible. Maybe find a storage solution that takes up less space, like scanning them and then storing the physical tickets in labeled envelopes by month. That might keep both you and your wife happy!

This raises a question - what about lottery tickets I buy as gifts for others? Can I count those as losses if they don't win? I sometimes buy a bunch for holiday cards or birthday gifts.

If you buy lottery tickets as gifts, those aren't your gambling losses - they're gifts. Since you're not the one who would potentially win, you can't claim the loss. The person who receives the ticket would be the one who could potentially claim a loss (though they'd need to document that you gave it to them, which is practically impossible). Think of it this way: if the ticket you gifted won $1 million, you wouldn't be the one claiming that on your taxes - the recipient would. So you can't claim the losses either.

This is really helpful clarification about the "session" basis calculation! I've been wondering about this exact scenario. So if I buy multiple scratch-offs from the same store on the same day, would that count as one session or multiple sessions? And what about if I buy them from different stores but on the same day - does location matter for determining what constitutes a "session"? Also, when you mention organizing by drawing date, does that apply to instant tickets too, or just lottery drawings like Powerball? Since scratch-offs are instant, I'm not sure how to think about the "drawing date" for those. Thanks for breaking down the Schedule A reporting location too - that's exactly the kind of specific detail I was looking for!

Great questions! For scratch-offs purchased on the same day from the same location, the IRS generally treats that as one gambling session. However, if you buy scratch-offs from different stores on the same day, those would typically be considered separate sessions since they're different gambling activities at different locations. For instant tickets like scratch-offs, you're right that there's no "drawing date" like with Powerball. Instead, organize them by purchase date - that's your session date. So if you bought 5 scratch-offs on March 15th from Store A and won $10 total while spending $25, that's one session with a $15 loss. The key is being consistent in how you define your sessions and having documentation to support it. Keep receipts when possible, and note the store location and date of purchase. The IRS cares more about reasonable consistency than perfect precision on session definitions. One more tip: if you're buying different types of games (like both Powerball tickets and scratch-offs) from the same store on the same day, you can treat those as separate sessions since they're different types of gambling activities, even though they're at the same location.

This is such an important point about combining all gambling activities! I made this exact mistake on my taxes two years ago - I thought I could deduct my full casino losses since I had lottery winnings, not realizing they all get lumped together. Your spreadsheet idea is spot-on. I started doing this last year and it's been a game-changer. I track date, location, type of gambling, amount spent, amount won, and net result for each session. Makes it crystal clear whether I'm actually ahead or behind for the year. One question though - what about gambling activities in different states? I live near a state border and sometimes play lottery in both states, plus I've hit casinos during vacation trips. Do I need to track which state each activity happened in, or does the IRS just care about the totals regardless of location?