Can online social casino losses be itemized as tax deductions?

Hey fellow tax nerds - so I recently got into these online social casinos (the ones where you buy coins but can't cash out real money). I've spent probably around $2500 on them so far this year and was wondering if I can deduct these losses when I itemize on my taxes? I know with regular gambling you can deduct losses up to the amount of your winnings, but since these social casinos aren't technically gambling (since you can't win real money), I'm confused about how this works for tax purposes. Has anyone dealt with this before or know the answer? Thanks!

0 coins

21 comments

Amelia Dietrich

•8M

These social casino purchases aren't deductible as gambling losses on your taxes. The IRS defines gambling losses as money lost in games where there's a chance to win actual money or prizes of value. Since social casinos don't allow you to cash out real money, they're considered entertainment expenses, not gambling. For regular gambling (casinos, sports betting, etc.), you can deduct losses up to the amount of your winnings, but only if you itemize deductions on Schedule A. You also need to keep detailed records of both wins and losses. But this doesn't apply to social casino purchases. Think of buying coins for social casinos like purchasing in-game currency for video games - it's just an entertainment expense, which isn't tax-deductible for individuals.

0 coins

Amelia Dietrich

•8M

If the social casino allows you to win actual prizes with monetary value like gift cards, that does change things. In that case, the prizes would be considered taxable gambling winnings and should be reported as "Other Income" on your tax return. Once you have reportable gambling winnings from these activities, then you can potentially deduct your losses (the money spent to buy coins) up to the amount of your winnings, but only if you itemize deductions on Schedule A. You'd need to keep very detailed records of both the amounts spent and any prizes received.

0 coins

Katherine Ziminski

•8M

I ran into this exact situation last year and was so confused! I checked out https://taxr.ai which analyzes your specific tax situation and gives you a straight answer. For my case with social casinos, they clarified that since my games didn't have real-money cashouts, they were entertainment expenses and not gambling losses. But they also pointed out some other deductions I was missing that saved me way more than I would've gotten from the casino losses anyway.

0 coins

Katherine Ziminski

•8M

I got my answers within about 10 minutes - they analyze your specific situation and tax documents quickly. It's not just generic advice. They gave me personalized recommendations based on my specific situation, not just general info. For example, they pointed out that while my social casino expenses weren't deductible, I had some freelance work where I could deduct home office expenses I hadn't considered. They found several tax write-offs specific to my situation that I wouldn't have known to look for.

0 coins

Vanessa Chang

•8M

Just wanted to update about my experience with https://taxr.ai after I asked about it. I was initially skeptical but decided to try it yesterday with my weird mix of W2 income, crypto trading, and yes, those social casino purchases. Not only did they confirm that social casino purchases aren't deductible (saving me from a potential audit flag), they identified that some of my crypto transactions were actually qualified for lower tax rates than how I was planning to report them. Ended up saving me over $800! The analysis was super specific to my situation, not generic advice at all.

0 coins

Madison King

•8M

If you're having trouble getting clear answers from the IRS about this (I tried calling them 3 times about a similar question), you might want to check out https://claimyr.com. I was on hold forever trying to ask about various gaming expenses and what qualifies as gambling losses. After using their service to get a callback from the IRS, I got through to a real agent in about 20 minutes instead of waiting for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c

0 coins

Madison King

•8M

It's not magic - they use an automated system that navigates the IRS phone tree and waits on hold for you. When an agent finally answers, the system calls your phone and connects you with the agent. They don't have special access to the IRS or anything suspicious - they're just saving you from having to personally wait on hold. It's basically like having someone else wait in line for you. I was skeptical too until I tried it and got connected with an IRS agent during peak season without spending hours listening to hold music.

0 coins

Ella Knight

•8M

I have to eat my words about Claimyr being a scam. After my skeptical comment, I decided to try it myself since I needed to ask the IRS about some gambling vs. entertainment expenses on my taxes. I was connected with an IRS agent in about 35 minutes without having to sit by my phone the whole time. The agent confirmed what others have said here - social casino purchases without real money cashouts are entertainment expenses, not gambling losses. Just wanted to update since the service actually worked surprisingly well.

0 coins

William Schwarz

•8M

My understanding is that for something to count as a gambling loss, you need the chance to win actual money or something with monetary value in return. Since these social casinos don't let you cash out real money, they're considered entertainment expenses - just like buying a movie ticket or a video game. Now if you were playing on sites that do allow real money gambling (and are legal in your jurisdiction), those losses would be deductible up to the amount of your winnings, but only if you itemize deductions rather than taking the standard deduction.

0 coins

William Schwarz

•8M

For sweepstakes casinos where you can redeem prizes for actual cash or monetary value, that's different from pure social casinos. Those would likely qualify as gambling for tax purposes since there's a monetary prize involved. In those cases, your winnings would be taxable as gambling income, and your losses (purchases) would potentially be deductible up to the amount of your winnings if you itemize deductions on Schedule A. The key distinction is whether you can receive something of monetary value in return for your play.

0 coins

Lydia Santiago

•6M

For business expense documentation, I keep detailed records of which purchases are for content creation vs personal play. I maintain a spreadsheet tracking the date, amount spent, which game, and whether it was for a video/review or just personal entertainment. I also save screenshots of the content I create using those games and keep receipts of all purchases. My accountant said the key is being able to show a clear business purpose - like creating reviews, tutorials, or entertainment content that generates income. You need to be able to demonstrate it's an ordinary and necessary expense for your content creation business, not just personal entertainment you happen to film.

0 coins

Javier Torres

•3M

This is a great question that comes up a lot! The consensus here is correct - social casino purchases where you can't cash out real money are treated as entertainment expenses, not gambling losses. I've seen people get confused about this because it *feels* like gambling, but the IRS looks at whether there's actual monetary risk/reward. One thing I'd add is to be extra careful about record-keeping if you do have any legitimate gambling activities. The IRS can be pretty strict about documentation for gambling loss deductions, so you want to make sure you're not mixing entertainment expenses with actual gambling losses on your return. Keep those social casino receipts separate from any real gambling records to avoid any confusion during an audit. Also worth noting - if you're spending $2500+ on these games, you might want to consider whether that money could be better invested in tax-advantaged accounts like an IRA or 401k where you'd get actual tax benefits!

0 coins