How to report gambling winnings and losses
(U.S. income tax)

“Michael Bluejay’s page is a good source on how taxes are supposed to be done.” — Wizard of Odds

“Michael Bluejay has compiled EVERY source and article on this complex subject.” —TurboTax forum member

Last update: February 22, 2026

This article covers federal income tax (not state) for recreational gamblers (not pros).
  Besides the sources cited in the article, I also have tons of additional expert sources.

The takeaways

If you want just the short summary without reading the whole article, here it is:

1. Reporting your winnings as the total of your W-2Gs is wrong, despite what probably everyone else told you (including your tax prep software).  If you use only the W-2G amounts and you get audited, you’re in trouble. (sources)  Also, if you report the W-2G amounts as your win, you’ll probably overpay your taxes anyway.
2. The proper way, according to case law, is to keep a log of your session results.  At the end of the year, the total of your winning sessions becomes your Winnings (income).  You ignore the amounts on the W-2Gs.
3. But reporting the proper way (session results) increases the risk of an audit.  I cover how to head off that risk below.
4. You can not subtract your losses from your wins and report the net.  I know you really want to.  And I want a pony.  Not going to happen.  It’s simply not allowed. (sources) 
5. You can’t deduct any losses unless you itemize, and even then there are limits.  Your losses are the total of your Losing sessions from your log.
6. Much of this is acutely unfair.  For starters, the net result of all Americans‘ gambling activity is a loss, so there is truly no actual income to tax.  That’s why Canada, the U.K., and other countries are smart enough to not tax gambling “winnings”.  The U.S. will never be one of them.  And there are lots of other reasons why U.S. gambling taxes are unfair.
   
   

The right and wrong way to report

1. RIGHT WAY:  Session method.  You keep a log of your session results, and at the end of the year, the total of winning sessions is your Winnings (income), and the total of the losing sessions is your Losses (deductions, if you’re itemizing).
   
2. WRONG WAY:  W-2G method.  You report the total of the amounts on the W-2G forms you received.  This is wrong not just because IRS case law says it is, but because a W-2G doesn’t reflect your overall winnings, it’s just the result of one single spin, not the result of all your spins.  Getting a W2-G for a $2500 hit does not mean you’re up $2500 for the session.  IRS auditors know this and if you report only the W-2G amounts, they’ll immediately distrust any claims you make about your gambling income, and may say that your actual gambling income was higher than your W2-G figures (even though it was probably lower), and may disallow your gambling losses if you itemize. (sources) 
   

If this is news to you, you’re not alone.  The problems with using the W2-G amounts as your win come up only in audit, and most people aren’t audited, so the fact that it’s wrong to use the W2-G amounts isn’t widely known.  Many CPAs (wrongly) say to enter the W2-G amounts, and your tax prep software probably told you the same thing.  Since that leads to trouble come audit time, one CPA/attorney jokingly told me, “My biggest source of referrals are TurboTax and H&R Block.”  (He means that the customers entered the W2-G amounts like the software told them, got audited, had the IRS tell them they owed tax on lots more than the W2-G amounts, and so they had to hire a CPA/attorney to represent them.)

Even IRS Publication 525 says to “Include the amount from box 1 [of your W-2G] on Schedule 1 [as your gambling income].”  Am I saying that even the IRS instructions are wrong?!

Yes, the IRS instructions are wrong.  Case law always trumps instructions.  But you’re right to be skeptical of this, so I have a veritable mountain of expert sources to back what I’m telling you.

So now you’re thinking, “So just use session reporting and everything will be fine, right?”  If only it were that simple.  The IRS computer isn’t hip to session reporting, and when the session wins yu report don’t match the W-2Gs they have on file for you, your return is far more likely to be flagged for review.

This is truly a damned if you do, damned if you don’t situation:

1. If you report the W2-G amounts as your winnings, then you’re screwed come audit time. (sources) 
2. If you report the session results from your log, then your return is more likely to get flagged in the first place. (examples) 

Luckily for you, I have a solution for you….

How to report properly without getting flagged for not reporting the W2G amounts

This is the holy grail, for:

1. How to report properly,
2. Without having the IRS flag your return because you didn’t enter the W2-G amounts,
3. And be able to justify your figures if you do get audited.

Here’s the recipe, which you probably won’t see anywhere else on the whole Internet.  This is one of the bonuses you get with Easy Vegas.

1. Keep the session log.  It’s required whether you’re reporting your session results or the W2-G amounts.  Here’s more about keeping a session log.
2. On Form 1040, Schedule 1, Line 8b, enter the total of your W2-G amounts.  (Or use whatever line is for gambling wins if the form changes in the future.)
3. On line 8z, enter an adjustment to get the total of lines 8b + 8z to equal your session wins.  This amount can be negative.  For example, let’s say your session wins from your journal are $2000, and your W-2G total is $5000.  You enter $5000 on line 8b, and -$3000 (negative) on line 8z.  The total of 8b + 8z is $5000 -$3000 = $2000, which matches your session journal.  Ta-da.
4. For the description on Line 8z, write “See enclosed Form 8275.”
5. On Form 8275 (disclosure statement):
   
1. Part I, (a):  "Chief Counsel Memorandum 2008-011 and Shollenberger v. Commissioner"
2. Part I, (c):  "Session method of gambling winnings/losses"
3. Part I, (d):  "1040 Schedule 1"
4. Part I, (e):  "8b" [or whatever line it is on that year's form]
5. Part I, (f):  [the amount on that line]
6. Part II:  “The adjustment on Schedule 1, Line 8z is to get my total reported gambling winnings to match the total of winning sessions in my session log, per Chief Counsel Memorandum 2008-011 and Shollenberger v Commissioner, which established that wins and losses should be tracked by session, and that the W2-G amounts are not the same as gambling winnings.  For more, see Easy.Vegas/gambling/taxes”

I ran this by a CPA who handles gambling tax cases and he said he does something similar.  He noted that since he’s been using that method since 2012, not one of his clients has had the IRS challenge the gambling reporting.  (He also said I get “ten gold stars” for explaining the 8z method.  I say that not to brag, but so you can be confident that what I’m saying is legit.)

How do I deduct my losses?

Oh, you’re so adorable, thinking you can definitely deduct your losses.  You probably can’t.  Loss deductions are a thing only if you itemize, and most taxpayers don’t itemize, they take the standard deduction (because the standard deduction is easier and usually results in lower taxes than itemizing).  And even if you itemize, there are strict limits for how much gambling losses you can deduct.

Let’s use an example where you won $5000 and lost $13,000:

1. If you take the standard deduction, you report $5000 in income and no losses.  Even though you lost $8000 net.  Yes, this is unfair and stupid.  And the IRS wonders why they have a bad rap.
2. If you itemize, you can report $5000 in losses.  It’s not $8000 because you can’t deduct more than you won.
3. Starting in the 2026 tax year (for returns filed in 2027) it’s even worse:  you can deduct only 90% of your losses.  So if you win $5000, and lose $5000, you’ll be able to deduct only $4500 in losses.  That means you pay taxes on $500 of “phantom income”.  This was part of the Big Beautiful Bill.

What if I never have a winning session?

If you lose every single session, then you have no income to report.  Congratulations.  This is true even if you got a fistful of W2-Gs.  This happened to me:  Once I was playing a few sessions of high limit video poker ($100 a spin), got a whole stack of W2-Gs, but never had a winning session.

The W2-Gs are not your win.  The total of your winning sessions is your win.

What’s taxable

1. You’re supposed to report anything you win as income.  If you win a prize rather than cash, you're supposed to report the cash value of the prize.  Just because you don’t get a W-2G form doesn’t mean the win isn’t taxable.
2. Visitors to the U.S. are taxed on slot machine winnings but not on winnings on most kinds of table games. (Forbes, in the comments, and USC § 871(j))
3. Whether comps are taxable is a gray area, because the IRS hasn’t defined it clearly (in keeping with their proud tradition).  So we turn to tax pros: some of them advise that if the casino gives the comp as a gift, it’s not taxable (e.g., free room offer you got in the mail, where the casino hopes you'll play, but doesn't require you to), while if you earned it through your play, it is taxable (e.g., cashback or a buffet that you got from accumulating points through slot play). (CPA Marissa Chien, paraphrase of that book, tax attorney Brad Polizzano)  However, taxable comps can be offset by gambling losses. (tax attorney Brad Polizzano) 

Related articles

• Itemizing vs. taking the Standard Deduction
• How to keep the session log the IRS wants
• What causes you to get a W-2G
• How to handle taxes for Bitcoin / crypto with online casinos
• Why gambling taxes are unfair
• Additional expert sources