If you are a regular punter, you must not forget that all gambling winnings are considered income and you have to report them. This applies to all winnings regardless of amount. If you win $600 or more at a horse track, win $1,200 at a slot machine or bingo game, or take $1,500-plus in keno winnings, your winnings will be reported to the IRS by the payer. The payer will reduce your payout by withholding federal taxes at the 25% rate and require you to furnish them with your Social security number. If you refuse to give your Social Security number, the payer could take as much as 28% of your winnings and pay it to the IRS.
But if you win at least $1,200 on a single spin (including the original wager) at the casino, the casino will issue you a W-2G to report the amount you won. So the best thing to do would be to journal your wins and losses. Even though you don't have to report your loss data in your tax return, your journal could come in handy if the IRS ever questions your claim on losses. Bear in mind you cannot claim losses more than you won. For example, if you spent $1000 in gambling and won $800, you can only deduct up to $800 not the full $1000. The remainder is the price of gambling.
When tax season comes around (like now), you should report your winnings by filling up line 21, Other Income, of Form 1040. In addition to gambling proceeds, this is where you'd report any prizes or awards (cash or the cash value of merchandise) you won. All this money goes toward your total income amount.
Thankfully, the IRS allows you to write off your losses against your winnings. This can be done in line 28, "other miscellaneous deductions," on Schedule A where you report your gambling losses. You can claim up to the total amount of winnings you entered on your 1040, effectively wiping out any taxable gambling income.
Besides claiming on losses, there is another way to reduce you taxes on gambling income. The law allows a single taxpayer standard deductions of $5,950 on 2012 returns or $6,100 on 2013 filings. But if your gambling losses are large enough to help boost your already substantial itemized deductions, then fill out the Schedule A.