You can’t deduct any gambling losses that exceed the amount you win and report as income. That means if you won $5,000 by gambling, but also lost $8,000 during the year, you’re only eligible to deduct $5,000. The remainder of the losses, totaling $3,000 cannot be written off or carried over to other years.
You can only claim gambling losses if you are eligible to itemize your tax deductions, using a Schedule A. You’ll itemize if all your deductions plus your gambling losses are greater than the standard deduction. If you claim the standard deduction, you’ll still need to pay tax on all your winnings and report the money you won, even though you won’t be able to claim deductions.
You can’t simply subtract the losses you incurred from your winning and report only the net profit or loss. You also can’t deduct losses without reporting winnings, so if you had a terrible year, it won’t get better at tax time.