When Lottery Tickets are Deductible

lottery ticket
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In one weekend in January, a combined billion-dollar jackpot from the Powerball and Mega Millions lotteries was doled out to two individual winners. Among the many players out there, one often wonders whether purchases of lottery tickets translate into deductions.

I receive emails from accountants on how to craft responses to questions from clients. In this Q&A column, we’ll go over lottery ticket expenses, interest from bank savings, and personal deductions.

These questions edited and condensed for clarity and brevity.

Question: Am I allowed to include the cost of lottery tickets with my itemized deductions for state and local taxes or charitable contributions?

Answer: No. IRS rules for gambling losses apply to lottery tickets. The cost of those tickets can be taken as an itemized deduction to offset any kind of gambling winnings---lotteries, horse racing, cards, et cetera. But if there are no winnings, there‘s no deduction.

Q: My sister and I formed a partnership. The partnership’s main asset is a building that leased space to an architect last year. Subsequently, the architect decided to make substantial improvements to her office. Does our partnership have to declare the value of these improvements as part of its rental income?

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About Julian Block

Julian Block

Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com

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