The Tax Cuts and Jobs Act broadens Gambling Loss Limitation.

Prior Law

Through December 31, 2017

Under the prior law & 2011 Tax Court Decision in Mayo v. Commissioner 136 T.C. 81, losses sustained from wagering transactions are allowed only to the extent of the gains from those transactions.

Non-wagering expenses were not included in gambling losses so these expenses weren’t subject to the rule limiting gambling losses to gambling gains.

New Law

Effective for tax years beginning after December 31, 2017 and before January 1, 2026

The term “losses from wagering transactions” includes any deduction otherwise allowable under the Code incurred in carrying on any wagering transaction.

Commentary

The Tax Cuts and Jobs Act clarifies the scope of “losses from wagering transactions” as that term used with regards to the limitation on gambling losses. The term includes any deduction otherwise allowable by law that’s incurred in carrying on any wagering transaction.

The provision is intended to clarify that the gambling loss limitation applies not only to the actual costs of wagers incurred by an individual, but to other expenses incurred by the individual in connection with the conduct of that individual’s gambling activity. Thus, for instance, an individual’s otherwise deductible expenses in traveling to or from a casino are subject to the limitation.

The deduction is still limited to the extent of gambling winnings.

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David Howell
David Howell
Tax Manager
As a Tax Manager, I provide tax planning and preparation services to businesses in varying industries, individuals, estates and trusts.

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