It’s important to keep track of how much you spend.

That’s one of the first lessons most of us learn when it comes time to manage our own finances, because if you don’t keep track, it’s entirely too easy to overspend. It becomes even more important once we get out into the working world – legitimate expenses can translate into reimbursement from an employer, or even into additional money on a tax return. We all learn to balance our check books, and keep receipts for business-related expenses.

But what about recreational activities?

In Canada, income from gambling isn’t considered taxable, which means expenditures on gambling can’t be considered expenses. This makes it easy to just bundle spending at a casino or a racetrack in with a general entertainment budget, and as long as we’re not likely to go over budget, to not be concerned about tracking those expenditures in any more detail. However, for Canadians who gamble in the United States, this broad approach to gambling expenditures would be to our detriment. In the United States, gambling income is taxable, with the exception of table games such as blackjack, baccarat, craps, roulette, and big-6 wheel. The tax on gambling winnings is 30%, and it’s withheld directly at the source – so if you were to win, for example, $10,000 at a Las Vegas casino, you’d only actually walk away with $7000.

It’s easy to see how quickly these gambling withholding tax payments might add up, especially for someone who frequently gambles across the border.  Fortunately, there are options for casino tax recovery, and firms of tax experts who specialize in recovering lost gambling winnings for Canadians who visit US casinos.  One important part of this process is maintaining a record of how much you spent on gambling in the United States during the calender year – the IRS tax on gambling winnings applies to the net amount won, not the gross amount won, so gambling costs, barring those related to tax-exempt games, can be used as a tax deduction.

The best way to keep track of your gambling expenses is to keep a diary of your wins and losses. It’s important to make sure your records are detailed, and a good record should include the address of the casino, the date of your visit, the period of time at which you were playing, the amount you spent, and the amount you won. If you were playing on a slot machine, or another electronic gaming machine, it’s also a good idea to record the machine number or numbers, to further substantiate your claims. You can keep this record in hard-copy, and if you choose to do so, it would be a good idea to obtain and dedicate a small notebook to recording your US gambling expenditures. If you’re of a more technological bent, you can also keep track of this information on spreadsheet on your tablet or smart phone, although it would be advisable to keep a backup of this information elsewhere, to prevent data loss.

Is a diary tracking your expenses enough proof to get a deduction? The short answer is “maybe”. A detailed diary will make it easier to tally your wins and losses, and the more information you include about where and when you incurred your gambling costs, the better the record will stand up. However, it’s always a good idea to keep additional proof, especially if you’re looking at a large deduction. If you’re playing on electronic gaming machines, this is often an easy thing to do. Many casinos offer cards for use in their gaming machines, which work rather like the reloadable cash cards you can obtain for many other establishments. These cards are unique to each individual casino, and will record the amount you spent on the relevant machines. You can then obtain a statement, which will substantiate your claims when it comes time to file a tax return. For gambling expenses not incurred on electronic gaming machines – or incurred at casinos not offering such cards – you can use financial statements to substantiate your claims. Keep a file containing your cash withdrawal receipts, ticket stubs, bank statements, and credit card statements covering the period in which you were gambling in the United States, just as you would keep a file for receipts substantiating your expenses at home.

If you keep a record of your expenditures and engage the services of a firm specializing in US tax recovery, you have a good chance of getting a casino tax refund that will lessen or erase the blow dealt to your winnings by the IRS withholding tax.