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Deducting Gambling Losses with the New Tax Bill

The Tax Code doesn’t treat casual gamblers very well. On the one hand the odds are stacked against you winning (those fancy casinos were built on losers, not winners). And on the other hand winning can be worse than losing when the taxman gets a hold on you.

Recent tax law changes turned a bad situation worse. The higher standard deduction means fewer people will benefit from deducting gambling losses since you need enough itemized deductions to exceed the standard deduction before the gambling losses reduce your tax liability.

Then we have issues with state tax returns. If the federal tax return doesn’t treat casual gamblers with respect, state tax returns can be down right rude. Wisconsin, for example, doesn’t allow any gambling losses against wins as an itemized deduction: if you lose, you lose; if you win, you lose.

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Hacking Itemized Deductions

The Tax Cuts and Jobs Act enacted late last year opened a variety of opportunities for average people to reduce their tax burden. The biggest advantage of the tax cuts for individuals is the reduced tax rates and extension of income in the lower brackets. Itemized deductions also pay a serious role in how the changes in the code will affect your final results next spring.

Gaming the standard deduction was less of an issue in the past. Now, with the standard deduction at $24,000 for joint returns ($12,000 for single filers and $18,000 for head of household) there is ample opportunity to reduce your tax bill. Exemptions are gone so many will face higher taxes in this area. State and local taxes (SALT) are limited to $10,000 in 2018 – 2025. With the standard deduction so high and SALT limited to such a low level, most people will no longer need to itemize.

For every problem there is a solution. Today we will cover each deduction on Schedule A and look for alternatives. Pulling deductions from Schedule A (even if you don’t itemize) and deducting them elsewhere on the return is akin to legally

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