Itemized Deductions

Itemized deductions are specific expenses you can deduct from your taxable income by listing them on Schedule A, instead of taking the flat standard deduction. For prediction market traders, itemizing is relevant because gambling losses can only be deducted if you itemize.

Standard deduction vs. itemizing

You choose whichever is larger:

• Standard deduction (2024): $14,600 (single) / $29,200 (married filing jointly)
• Itemized deductions: Total of mortgage interest, state/local taxes (up to $10,000), charitable contributions, medical expenses (above 7.5% of AGI), and gambling losses

Most taxpayers take the standard deduction because it's higher than their total itemized deductions.

Impact on prediction market traders

If you use the gambling income method, your losses are only deductible if you itemize — and only up to the amount of your winnings. If your itemized deductions (including gambling losses) don't exceed the standard deduction, you get zero benefit from the losses.

This is a major reason why the capital gains method is often better: capital losses are deducted on Schedule D regardless of whether you itemize.