Are Gambling Losses Tax-Deductible in the State of New Jersey?

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Are Gambling Losses Tax-Deductible in the State of New Jersey?
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Can you write off gambling losses in New Jersey? Yes, but only up to the amount you’ve won. In other words, you can’t deduct more than you’ve won and use the excess to write off other forms of income.

This rule is designed to stop gambling from becoming a state-subsidized activity. Indeed, if you were able to deduct more than you’d won, you’d effectively be getting a tax break. So, to ensure that the system is fair for all, your deductions can’t exceed your gross income for gambling.

State tax laws apply to all forms of the activity. This means you may be liable to pay tax on profits you make from live poker, sports betting, or NJ casino apps. If you made a profit from any form of gambling, you’ll have to pay tax in NJ state. However, if you’ve got any losses, they can be used to make deductions.


How to Get Tax Deductions


To give you an example of how gambling deductions work in this state, here are two scenarios:

Example 1

  • You play casino games for a year and your account shows that you collected $4,000 in prize money.
  • Your account also shows that you incurred $2,000 worth of losses.
  • Based on this, your net income is: $4,000 gross income - $2,000 worth of losses = $2,000 net profit.

Example 2

  • You play casino games for a year and your account shows that you collected $4,000 in prize money.
  • Your account also shows that you incurred $5,000 worth of losses.
  • Based on this, your net income is: $4,000 gross income - $4,000 worth of losses = $0 profit.

You’ll notice that we didn’t subtract $5,000 from the gross income. That’s because the maximum deduction you can make is based on your gross income. Therefore, the maximum deduction is $4,000, which means you didn’t make any profit. With no profit, there’s no tax to pay.

The above examples show how to deduct losses from your gambling or online gambling income. What’s also important to note is that tax payments are based on your rate. Profits are subject to state and federal tax. We won’t discuss federal tax rates in this guide. However, if you make a profit, you’ll be subject to one of the following state tax rates:


NJ Income Tax Rates


Single-Person IncomeTax Rate
$0-$20,0001.4%
$20,001-$35,0001.75%
$35,001-$40,0005.525%
$40,001-$75,0006.37%
$75,001-$5,000,0008.97%
$5,000,001 or more10.75%


Married/Joint Filing IncomeTax Rate
$0-$20,0001.4%
$20,001-$50,0001.75%
$50,001-$70,0002.45%
$70,001-$80,0003.5%
$80,001-$150,0005.525%
$150,001 - $500,0006.37%
$500,001 - $5,000,0008.97%
$5,000,001 or more10.75%

*Rates correct as of 2022.

Those tax rates are important, but what’s more important is the way you calculate your gambling income. The important thing to remember is that your losses can only be deducted from your gross income from gambling. What’s more, you can’t deduct more than you’ve won. Keep these rules in mind and you shouldn’t have any trouble completing your next tax return.

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