Keep your lottery tickets

When lottery jackpots reach record levels, lottery fever can become epidemic.  Whether you win big or small, those weekly tickets can be used to offset your winnings.

Gambling losses are deductible, but only if you itemize and only to the extent of your gambling winnings.  Be prepared to provide evidence that supports your deduction, such as losing lottery tickets or other gaming receipts.

You are required to report all your gambling winnings.  Above certain limits, the payor (the state lottery commission or the casino, for example) is required to report your winnings to the IRS.  When your return is processed, IRS computers will match the income reported on your tax return with that reported by third parties.  If there are discrepancies, you'll generally be contacted by the IRS.

Since you won't know the extent of your gambling winnings until year-end, it makes sense to save your receipts so you can offset any winnings to the full extent possible.