Michael won $500 at Lucky Casi

Michael won $500 at Lucky Casino and $1,250 at Riverboat Casino.His losses for the year at Lucky Casino were $800 and his losses atRiverboat Casino were $900. He also spent $100 for lottery ticketswithout winning anything. How much can he deduct on Schedule A(Form 1040 or 1040-SR) for gambling losses? $1,400 $1,700 $1,750$1,800


Solution :

Gambling Winnings :

All the winnings from gambling like lottery, horse races, cardgames, etc.. should be reported under “other income”.

Gambling Losses :

Gambling losses can be deducted only if the deductions areitemized. Gambling losses can be claimed only upto the Gamblingincome. The losses claimed cannot exceed thegambling income.

Lottery tickets :

The expense incurred to purchase lottery ticket can be claimedas deductions if the deductions are itemized. Also, the expense onlottery tickets can be claimed only if there is any kind ofgambling winnings, even if there is no winnings from lottery.

In the given case :

Winnings from gamblings = $500 + $1,250 = $1,750

Losses from gamblings = $800 + $900 = $1,700

Expense on lottery tickets = $100

Sum of gambling losses + expense on lottery tickets = $,1800

However, the eligible deduction cannot exceed the gamblingincome.

Hence total eligible deductions shall be restricted to$1,750.

Final Answer : $1,750

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