Can you write off election bet losses on your tax return?

Wait so if i bet on sports and lost $5k but won $1k, i can only deduct $1k of my losses?? That seems super unfair. Also does robinhood even count as gambling or is it investing??

Yes, that's correct. If you lost $5k on sports betting but only won $1k, you can only deduct $1k of losses (up to the amount of your winnings). The IRS doesn't want to subsidize gambling activities, which is why they limit deductions to winnings. As for Robinhood, it depends on what you were doing. If you were buying and selling securities (stocks, ETFs, options), that's investing and subject to capital gains rules. If you were using a platform that specifically offers betting markets for election outcomes, that would likely be considered gambling. Check what type of 1099 form Robinhood issues you - that will clarify how they're reporting it to the IRS.

How does the AI actually know what's deductible? Like is it just giving general advice or does it actually look at your specific transactions?

I've tried a bunch of these AI tax tools and most of them just spit out generic advice. Does this one actually understand the difference between gambling and investing for tax purposes? Because my tax guy says election bets are definitely gambling losses.

The AI analyzes each transaction in your statements in detail. It classifies them based on the security type, holding period, and trading patterns. It's not just giving general advice - it looks at your actual trades and applies tax rules to your specific situation. It absolutely understands the difference between gambling and investing. It flagged several of my trades as potentially being classified as gambling based on the specific securities and my trading patterns. It even cited the relevant tax code sections that differentiate investment losses from gambling losses, and explained how the IRS might view certain election-related trades.

How does this even work? The IRS phone system is notoriously awful. Is this some kind of scam where they pretend to connect you but it's not actually the IRS?

Sounds like BS to me. Nobody can magically get through the IRS phone tree. Even if it works, they probably charge a fortune. The IRS is incompetent by design - they want it to be hard to reach them.

It uses a completely legitimate technique to navigate the IRS phone system. Basically, they have technology that holds your place in line and calls you when they've reached an agent. It's all disclosed on their website - they never pretend to be the IRS, they just connect you to the real IRS faster than you'd get through on your own. They do charge for the service, but considering I spent 3+ hours trying on my own and got nowhere, it was completely worth it. The IRS is underfunded and understaffed, which is why it's so hard to reach them normally. This just helps you overcome that hurdle and get the answers you need directly from an official source.

Oh crap, I haven't been keeping detailed records. I just have my Robinhood statements showing the trades and outcomes. Is that enough documentation or do I need something more specific?

For traditional investments on Robinhood, your statements should be sufficient as they show purchase dates, sale dates, and amounts. If these were actual gambling bets on election outcomes (like on a prediction market or betting site), you'd ideally want more detailed records. The Robinhood statements would be a good start, but you might want to create a log retroactively that includes details about each bet - what specific outcome you were betting on, why you placed the bet, etc. The more documentation you have, the better positioned you'd be in case of an audit.

TurboTax handles both investment losses and gambling losses. If your election activities were investments, it'll go on Schedule D. If they were gambling, you'll need to itemize deductions on Schedule A. TurboTax will walk you through both scenarios - just be honest about what type of activity it was.

This is really helpful clarification, thank you! I had no idea about Form 4797 for losses over $5k. That could definitely apply to my situation. The fact that gambling losses can't be carried forward like capital losses makes this even more frustrating - seems like the tax code really penalizes people who got caught up in election betting. Do you know if there's any difference in how the IRS treats political prediction markets versus traditional sports betting? I'm wondering if they view election betting as having some kind of informational or civic value that might affect the tax treatment.

Great question about political prediction markets vs sports betting! Unfortunately, the IRS doesn't make that distinction - all forms of wagering are treated the same for tax purposes, regardless of whether you're betting on elections, sports, or even academic outcomes. The tax code focuses on the economic substance of the transaction rather than any perceived civic or informational value. What matters more is the platform and structure of your bets. If you're trading on a regulated exchange where you're buying/selling contracts (like some prediction markets), those might be treated as securities transactions. But if you're placing traditional wagers on election outcomes, it's gambling regardless of the subject matter. The IRS has been pretty consistent on this - they've even ruled that betting on the outcome of TV game shows is gambling, so there's no special carve-out for "educational" or politically-relevant betting. The form and function of the transaction is what determines the tax treatment, not the underlying subject matter.

This is such an important point about wash sales! I had no idea this could apply to election-related trading. I definitely did some panic buying and selling of similar ETFs during the election period - bought some defense ETFs, sold them when polls looked bad, then bought similar ones a few days later. Do you know if the wash sale rule applies across different but similar ETFs? Like if I sold a broad defense ETF and then bought a more specific aerospace ETF within 30 days, would that trigger the rule? And does Robinhood's 1099-B actually catch all of these situations, or do I need to track them manually? Really appreciate everyone sharing their experiences here - this is way more complicated than I expected when I first placed those bets!