If a taxpayer has income from gambling, the losses are deductible as itemized deductions up to the amount of the gambling winnings. The taxpayer cannot deduct the gambling losses if he claims the standard deduction.

Specific Details

The parents reduced their taxable income by $5,000 by deducting gambling losses as itemized deductions. Since the parents income was taxed at the 30% tax bracket, the income reduction may decrease their income taxes by $1,500 ($5,000 x 30%).

Potential Savings

If you are in a combined (federal, self-employment, and state) tax bracket of 30%, you could reduce your taxes up to $300 for every $1,000 of income reduction by deducting gambling losses as itemized deductions.