The second rule is that you can’t subtract the cost of gambling from your winnings.
For example, if you hit the trifecta on Derby Day, you are required to report the winnings as income. The first rule is that the IRS requires you to report all winnings, whether the place that you gambled reports them to the IRS or not. You are required to report your winnings even if you don't receive a Form W-2G. You can’t use gambling losses to reduce your other taxable income. However, you can claim your gambling losses as a tax deduction if you itemize your deductions.
You can’t subtract the cost of a wager from your winnings.You are required to report all gambling winnings-including the fair market value of noncash prizes you win-as “other income” on your tax return.
