So you’ve got the bug and you enjoy a little gambling here and there. Nothing wrong with that, but you should be aware of the IRS requirements for income and losses incurred from casual gambling.

Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips.

For most types of gambling at a legitimate gaming facility, you will usually be issued a Form W-2G (Certain Gambling Winnings) if you win $600 or more. The IRS gets a copy too, so you better make sure the gross gambling winnings reported on Line 21 of your Form 1040 at least equal the sum of the amounts reported on any Forms W-2G you receive. In addition, you may be required to pay an estimated tax on your gambling winnings.

If you win a non-cash prize, such as a car or a trip, you will be responsible for the taxes on the fair market value of the item or items (if the value exceeds $5,000).

After applying the losses-cannot-exceed-winnings limitation, the allowable gambling loss deduction for a person who is not a professional gambler is claimed on Line 28 of Schedule A (Itemized Deductions). If you don't itemize, you do not get a write-off. Also, an amateur gambler cannot deduct any out-of-pocket expenses related to gambling (such as transportation costs, meals, and lodging).

To be considered a professional gambler you must devote substantial time to gambling on a regular basis, and you must depend on gambling winnings as a meaningful source of income. It also helps if you conduct your gambling activities in a business-like fashion by keeping detailed records of wins and losses and developing and evaluating strategies.

Professional gamblers report their gross winnings as income on Line 1 of Schedule C of Form 1040 (Profit or Loss from Business) and their losses (up to the amount of the winnings) and allowable out-of-pocket expenses (for transportation, 50% of out-of-town meal costs, lodging, and so forth) as business expenses on Schedule C. A professional gambler's allowable out-of-pocket expenses can be deducted in full on Schedule C without regard to the amount of winnings.

The date and type of each wager or wagering activity;

The name and location of the gambling establishment;

The names of other persons (if any) present with you at the gambling establishment (obviously this requirement cannot be met at a public venue such as a casino or race track);

The amount won or lost.

Be sure to keep detailed records of your gambling winnings and losses, and any related receipts, tickets, statements, or other paperwork. You must be able to prove both your winnings and losses if you wish to deduct your losses.