Can a New York taxpayer subtract gambling losses (up to winnings) from income as a subtraction modification, instead of itemizing?

Plain-English summary

A New York City resident who plays slot machines and loses more than he wins wanted to net his losses against his winnings by claiming a subtraction modification in computing New York adjusted gross income. He takes the standard deduction. He asked whether the Tax Law allows that.

The Office of Counsel concluded no. New York starts from federal adjusted gross income (FAGI), which includes the full amount of gambling winnings; federal law allows losses only as an itemized deduction capped at winnings (IRC § 165(d)). New York has no subtraction modification for gambling losses (Tax Law § 612(c)), and they can only be claimed via the New York itemized deduction (Tax Law § 615). A taxpayer who takes the standard deduction gets no benefit, and itemized gambling losses can even be reduced for high-income taxpayers under § 615(f)/(g).

What this means for you

Recreational gamblers in New York

You can't simply net your losses against your winnings on the New York return. Your full winnings flow through from your federal return, and losses help only if you itemize on the New York return - and only up to your winnings.

Accountants and tax preparers

Don't look for a New York gambling-loss subtraction; there isn't one. Compare the value of itemizing (to capture losses, subject to the high-income reductions) against the standard deduction. Note this opinion doesn't address professional-gambler (trade-or-business) treatment.

Common questions

Q: I lost more than I won - can I at least net to zero?
A: Not on the New York return. Winnings are taxed in full via FAGI; losses are an itemized deduction only, capped at winnings.

Q: I take the standard deduction. Any benefit for losses?
A: No. Without itemizing on the New York return, there's no deduction for gambling losses.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

Statutes and regulations:
- Tax Law §§ 611, 612(c), 615(a), (d), (f), (g)
- IRC §§ 61, 62(a), 165(d); Groetzinger v. Comm'r

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a16_5i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-16(5)I
Income Tax
August 31, 2016

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I140602A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTED (“Petitioner”).
Petitioner asks whether the New York Tax Law allows for a subtraction modification in
computing New York adjusted gross income for the lesser of annual gambling losses or the
gambling winnings incurred from slot machines 1 shown on Federal Form W-2G.
We conclude that there is no basis in the Tax Law to allow for a subtraction
modification for the lesser of annual gambling losses or the gambling winnings incurred from
slot machines.
Facts
Petitioner, a resident of New York City, frequents casinos to engage in the activity of
gambling by use of slot machines. Petitioner contends that he loses more than he wins, and that
the appropriate treatment for New York State purposes is to net his winnings with his losses by
claiming his losses as a subtraction modification in computing New York adjusted gross
income. Petitioner claims the standard deduction.
Analysis
The New York taxable income of a resident individual is his or her New York adjusted
gross income less the standard deduction or, if applicable, the taxpayer’s itemized deductions,
and New York exemptions. (Tax Law § 611). New York adjusted gross income is federal
adjusted gross income with certain New York addition and subtraction modifications. (Tax Law
§ 612). Federal gross income is defined as all income from whatever source derived. (IRC § 61).
Federal adjusted gross income is defined in the Internal Revenue Code as gross income minus
certain deductions; gambling losses are not among the stated deductions used to compute federal
adjusted gross income. (IRC § 62[a]). Accordingly, the IRS requires that the full amount of
gambling winnings be reported as income, with an itemized deduction for the losses, not to
exceed the amount of winnings (IRC § 165[d]). See also Groetzinger v. Comm’r, 771 F.2d 269,
aff’d 480 US 23 (1987) (non-professional gambler’s gambling losses allowable only as an
itemized deduction).
As for the reporting of the slot machine income to New York, because the starting point
for calculating New York adjusted gross income is federal adjusted gross income, the full
amount reported to the IRS as gambling winnings must be reported to New York. Moreover,
Tax Law § 612(c) does not allow a subtraction modification against claimed gambling income
for claimed gambling losses.
1

For purposes of this Opinion, the Department relies upon the specified facts contained within Petitioner’s request. The Department does not
make a determination as to the undertaking of a gambling “trade or business” within the meaning of §162(a) of the Internal Revenue Code.

-2-

TSB-A-16(5)I
Income Tax
August 31, 2016

Tax Law § 615(a) provides that if the federal taxable income of a resident individual is
determined by itemizing deductions from the individual's federal adjusted gross income, the
individual may elect to deduct the individual's New York itemized deduction in lieu of the
individual's New York standard deduction. Tax Law § 615(d), which specifies items that
increase the New York itemized deduction above the amount of the federal itemized deduction,
does not include a modification that allows an increase in the federal deduction for gambling
losses.
Tax Law § 615(f) and (g) provide formulas that reduce New York itemized deductions
otherwise allowable under § 615 for higher income taxpayers. There is no provision in the Tax
Law exempting or otherwise removing gambling losses from these reduction calculations.
Accordingly, the amount of the New York itemized deductions, including any gambling losses
deducted, may be subject to reduction if Petitioner’s New York adjusted gross income meets the
thresholds set forth in § 615(f) or (g).
In conclusion, the Tax Law clearly indicates that Petitioner may claim his gambling
losses only as an itemized deduction in accordance with Tax Law § 615. Petitioner is not
allowed a subtraction modification for gambling losses in his computation of New York adjusted
gross income.

DATED: August 31, 2016

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.