Where to deduct gambling losses?
1: Gambling losses not in excess of gambling winnings can be deducted on Schedule A, line 28.  See Pub 17 (p 201).  Line 28 catches lots of deductions, and gambling losses are one of them.  See Schedule A instructions. 2: If the Mississippi state tax withheld was an income tax (which I assume it was), then it goes on Schedule A, line 5a.  In the unlikely event it was not a state or local tax on income, but some sort of excise on gambling, then it may be deductible on line 8 as another deductible tax.  It probably is not a personal property tax, which is generally levied against the value of things like cars and other movable property but not on receipts of cash; line 7 probably is not appropriate.  The most likely result, without researching Mississippi SALT, is that it was an income tax.  See Sched A Instructions for more on the differences between the types of taxes paid. Just to be clear, these statements hold if you are not engaging in poker as a profession.  If you are engaging in poker as a business, which can be difficult to establish in the IRS' eyes, then you would use Schedule C and also report business and travel expenses.  But the IRS is aware that people want to reduce their gambling income by the cost of hotels and flights to casinos, so it's a relatively high hurdle to be considered a professional poker player.
"Gambling is perhaps not well defined, but it certainly doesn't include things like reality show winnings.   However, it is possible he could deduct something for this.  If the reality show qualifies as a ""hobby"", and his expenses exceed the 2% of AGI requirement, it's possible he could deduct those airplane tickets and such.  That deduction is explained in Publication 529." I do a lot of sports betting and I’m heavily limited on some sites where I have had good winning streaks. Some of them are as low as $5 per game.  So yeah, the house definitely tilts the table if it benefits them. If I sell it for $50 can I write off the $50 loss. Only if you can establish that it is a normal part of your business and that you did not get $50 worth of use out of it.  That's the technical, legal argument.  As a practical matter, it's unlikely that they'll ding you for selling something after using it, as they won't know.  If they did catch you, you would be in trouble.  You can't deduct loss due to personal use.   The larger problem is that if you sell one TV for a $50 loss, they aren't going to believe that you are in the business of selling TVs.  If you sell a larger amount for a loss, then they still are unlikely to believe that you are in business.  If you sell a large amount for an overall gain, they are unlikely to notice that you took a loss on one TV.  They could only notice that if they were already auditing you, as that wouldn't be visible in your tax forms. On line 21 of Schedule D, you write the smaller of So, in your case, since your Line 16 shows a loss of more than $3000 on Line 21, you write 3000 on Line 21 (the parentheses indicating that is it a negative number are already included on the form). Also, you write (3000) on Form 1040 Line 13. The rest of the loss is a carryover to next year (be sure to fill out the Capital Loss Carryover Worksheet where the carryover to next year is computed). Summary: you cannot write 0 on Line 21 of Schedule D and carry over the entire loss to next year. You must deduct $3000 this year and carry over the rest of the loss to next year. For stocks, bonds, ETF funds and so on - Taxed only on realised gain and losses are deductible from the gain and not from company's income. Corporate tax is calculated only after all expenses have been deducted. Not the other way around. Real estate expenses can be deducted because of repairs and maintenance.  In general all expenses related to the operation of the business can be deducted. But you cannot use expenses as willy nilly, as you assume. You cannot deduct your subscription to Playboy as an expense. Doing it is illegal and if caught, the tours to church will increase exponentially. VAT is only paid if you claim VAT on your invoices. Your situation seems quite complicated. I would suggest, get an accountant pronto. There are nuances in your situation, which an accountant only can understand and help. "As Dilip said, if you want actual concrete, based in tax law, answers, please add the country (and if applicable, state) where you pay income tax. Also, knowing what tax bracket you're in would help as well, although I certainly understand if you're not comfortable sharing that. So, assuming the US... If you're in the 10% or 15% tax bracket, then you're already not paying any federal tax on the $3k long term gain, so purposely taking losses is pointless, and given that there's probably a cost to taking the loss (commission, SEC fee), you'd be losing money by doing so. Also, you won't be able to buy back the loser for 31 days without having the loss postponed due to the wash sale that would result. State tax is another matter, but (going by the table in this article), even using the highest low end tax rate (Tennessee at 6%), the $50 loss would only save you $3, which is probably less than the commission to sell the loser, so again you'd be losing money. And if you're in a state with no state income tax, then the loss wouldn't save you anything on taxes at the state level, but of course you'll still be paying to be able to take the loss. On the high end, you'd be saving 20% federal tax and 13.3% state tax (using the highest high end tax state, California, and ignoring (because I don't know :-) ) whether they tax long-term capital gains at the same rate as regular income or not), you'd be saving $50 * (20% + 13.3%) = $50 * 33.3% = $16.65. So for taxes, you're looking at saving between nothing and $16.65. And then you have to subtract from that the cost to achieve the loss, so even on the high end (which means (assuming a single filer)) you're making >$1 million), you're only saving about $10, and you're probably actually losing money. So I personally don't think taking a $50 loss to try to decrease taxes makes sense. However, if you really meant $500 or $5000, then it might (although if you're in the 10-15% brackets in a no income tax state, even then it wouldn't). So the answer to your final question is, ""It depends."" The only way to say for sure is, based on the country and state you're in, calculate what it will save you (if anything). As a general rule, you want to avoid letting the tax tail wag the dog. That is, your financial goal should be to end up with the most money, not to pay the least taxes. So while looking at the tax consequences of a transaction is a good idea, don't look at just the tax consequences, look at the consequences for your overall net worth." If you have multiple accounts, you have to empty them all before you can deduct any losses. Your loss is not a capital loss, its a deduction. It is calculated based on the total amount you have withdrawn from all your Roth IRA's, minus the total basis. It will be subject to the 2% AGI treshhold (i.e.: if your AGI is > 100K, none of it is deductible, and you have to itemize to get it). Bottom line - think twice. Summarizing the discussion in comments: If you have a very low AGI, I would guess that your tax liability is pretty low as well. Even if you deduct the whole $2K, and all of it is above the other deductions you have (which in turn is above the standard deduction of almost $6K), you save say $300 if you're in 15% tax bracket. That's the most savings you have. However I'm assuming something here: I'm assuming that you're itemizing your deductions already and they're above the standard deduction. This is very unlikely, with such a low income. You don't have state taxes to deduct, you probably don't spend a lot to deduct sales taxes, and I would argue that with the low AGI you probably don't own property, and if you do - you don't have a mortgage with a significant interest on it. You can be in 15% bracket with AGI between (roughly) $8K and $35K, i.e.: you cannot deduct between $160 and $750 of the $2K, so it's already less than the maximum $300. If your AGI is $8K, the deduction doesn't matter, EIC might cover all of your taxes anyway. If your AGI is $30K, you can deduct only $1400, so if you're in the 15% bracket - you saved $210. That, again, assuming it's above your other deductions, which in turn are already above the standard deduction. Highly unlikely. As I said in the comments - I do not think you can realistically save on taxes because of this loss in such a manner. If you have made $33k from winning trades and lost $30k from loosing trades your net gain for the year would be $3k, so obviously you would pay taxes only on the net $3k gains. The principle here seems to be that just betting itself is not taxable. From BIM22015  The basic position is that betting and gambling, as such, do not constitute trading However,  An organised activity to make profits out of the gambling public will normally amount to trading. The idea seems to be that being a bookmaker is taxable, but just making bets is not. BIM22017 going into it a bit more: The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade. BIM22018 goes into detail on the other side, talking those who are taxable: An organised activity to make profits out of the gambling public will normally amount to trading. An example of this is the bookmaker. ... The key feature is that the taxpayer is likely to be involved in the organisation of the activity. They are not mere punters. They are carrying on an activity where the odds are in their favour. The links prove further information, but the theme seems to be that acting as a bookmaker would be trading income, which is taxable, but acting like a punter, even one with a system, would not be. It's not clear from your description which applies. You may need further advice on the tax treatment that is appropriate. Also follow each of the links for further information. BIM22015 provides links to the most relevant information.   Note, it isn't true that all income is taxable, regardless of source. BIM15035 talks about this. It specifies that for something to be taxable income, it must come from a taxable source.  If, for example, a taxpayer is a trader that does not mean that any non-capital receipt he or she gets is chargeable as trading income. It must also be a receipt forming part of the profits of the trade, which is the taxable ‘source’ "There are (at least) two problems with the argument suggested in the OP. First, the ability to cover the cost, doesn't mean willingness, ease, or no major side effects of doing so. Second is the mitigation of ""upside risk"". It might be true that the most usual loss is small and manageable, but 10% of incidents could be considerably larger and 1% may be very much larger - without limit.  Your own attitude to risk and loss will determine how much these are seen as unlikely+ignore, or worst case situation+avoid." "The key point to answer the question is to consider risk aversion. Assume I suggest a game to you: Throw a coin and if you win, you get $5, if you lose nothing happens. Will you play the game? Of course, you will - you have nothing to lose! What if I suggest this: If you win, you get $10,000,005 and if you lose you must pay $10,000,000 (I also accept cars, houses, spouses, and kidneys as payment). While the expected value of the second game is the same as for the first, if you lose the second game you are more or less doomed to spend the rest of your life in poverty or not even have a rest of your life. Therefore, you will not wish to play the second game. Well, maybe you do - but probably only if you are very, very rich and can easily afford a loss (even if you had $11,000,000 you won't be as happy with a possible raise to $21,000,005 as you'd be unhappy with dropping to a mere $1,000,000, so you'd still not like to play).  Some model this by taking logarithms: If your capital grows from $500 to $1000 or from $1000 to $2000, in both cases it doubles, hence is considered the same ""personal gain"", effectively. And, voíla, the logartithm of your capital grows by the same amount in both cases. This refelcts that a rich man will not be as happy about finding a $10 note as a poor man will be about finding a nickel.  The effect of an insurance is that you replace an uncertain event of great damage with a certain event of little damage. Of course, the insurance company plays the same game, with roles swapped - so why do they play? One point is that they play the game very often, which tends to nivel the risks - unless you do something stupid and insure all inhabitants of San Francisco (and nobody else) against eqarthquakes. But also they have enough capital that they can afford to lose the game. In a fair situation, i.e. when the insurance costs just as much as damage cost multiplied with probability of damage, a rational you would eagerly buy the insurance because of risk aversion. Therefore, the insurance will in effect be able to charge more than the statistically fair price and many will still (gnawingly) buy it, and that's how they make a living. The decision how much more one is willing to accept as insurance cost is also a matter of whether you can afford a loss of the insured item easily, with regrets, barely, or not all." "You have a sequence of questions here, so a sequence of answers: If you stopped at the point where you had multiple wins with a net profit of $72, then you would pay regular income tax on that $72. It's a short term capital gain, which does not get special tax treatment, and the fact that you made it on multiple transactions does not matter. When you enter your next transaction that takes the hypothetical loss the question gets more complicated. In either case, you are paying a percentage on net gains.  If you took a two year view in the second case and you don't have anything to offset your loss in the second year, then I guess you could say that you paid more tax than you won in the total sequence of trades over the two years. Although you picked a sequence of trades where it does not appear to play, if you're going to pursue this type of strategy then you are likely at some point to run into a case where the ""wash sale"" rules apply, so you should be aware of that.  You can find information on this elsewhere on this site and also, for example, here: http://www.marketwatch.com/story/understanding-the-wash-sale-rules-2015-03-02  Basically these rules require you to defer recording a loss under some circumstances where you have rapid wins and losses on ""substantially identical"" securities. EDIT A slight correction, you can take part of your losses in the second year even if you have no off-setting gain.  From the IRS: If your capital losses exceed your capital gains, the amount of the excess loss that you can claim on line 13 of Form 1040 to lower your income is the lesser of $3,000, ($1,500 if you are married filing separately)" Quick, move to the state where the ticket was bought.  Set up a resident and then claim the prize.  Then, move back home, if you want. IMO But both states will still try to make a claim for the tax money, if you give them a reason to try.   They have nothing else to do, but look for revenue. I did not file taxes on last season winnings as I’ve received   conflicting advise (particularly regarding self-employment taxes). I   have all my documentation to support my winnings should I file as a   professional gambler. Oh dear. Get a GOOD tax adviser (licensed as EA, CPA or Attorney in Nevada) who's specializing in providing services to people like you and have it resolved ASAP. You're in major non-compliance. If you earned by gambling more than you earned by working in years, and you haven't reported that on your taxes - you may very well find yourself in jail. As to your original question - why on earth would you have a corporation for gambling? Or LLC... Why? What's the liability that you want to shield yourself of? It's your money that you're risking, and the risk is that you lose it, how is LLC or Corp going to help you in any way? Gambling winnings are reported as miscellaneous income (whether you're professional or just got lucky once with a slot machine - no matter), and if you're a pro (and it sounds like that since you're doing it systematically and in order to make profits), then yes, you pay SE taxes on it. Whoever told you anything else told you to break the law. Which you did, unfortunately. "To answer your question point by point - I'd focus on the last point. The back of my business card -  Let's focus on Single. The standard deduction and exemption add to over $10K. I look at this as ""I can have $250K in my IRA, and my $10K (4%) annual withdrawal will be tax free. It takes another $36,900 to fill the 10 and 15% brackets. $922K saved pretax to have that withdrawn each year, or $1.17M total.  That said, I think that depositing to Roth in any year that one is in the 15% bracket or lower can make sense. I also like the Roth Roulette concept, if only for the fact that I am Google's first search result for that phrase.  Roth Roulette is systematically converting and recharacterizing each year the portion of the converted assets that have fallen or not risen as far in relative terms. A quick example. You own 3 volatile stocks, and convert them to 3 Roth accounts. A year later, they are (a) down 20%, (b) up 10%, (c) up 50%. You recharacterize the first two, but keep the 3rd in the Roth. You have a tax bill on say $10K, but have $15K in that Roth."