How To Recover From A Big Gambling Loss
Personal Income Tax -> US Taxes on Lottery and Gambling Winnings and Prizes
- How To Recover From A Big Gambling Loss
- How To Recover From A Big Gambling Losses
- How To Recover From A Big Gambling Losses Claim
- Gambling 101 teaches you not to chase your losses and walk away. Hot streaks are awesome but cold streaks can ruin you forever. I was so close to my $100,000 goal I could taste it but $500 at a.
- 11 of the biggest losses casino dealers have ever witnessed. “A few years back I saw a big player lose $320,000 in 25 minutes. He had just sat down with three full racks of $1000 checks (chips). A rack holds 5 stacks of 20 checks, so each of these racks held $100,000 in checks. I was on my way to a 20 minute break as he was just getting.
Bankruptcy and Gambling Debts. Gambling debt, including debt incurred from casinos or charged on credit cards and loans, can be discharged in bankruptcy. About 10% of bankruptcy filings are due to gambling debt, and 20% (or more) of compulsive gamblers are forced to file for bankruptcy in order to discharge their debts. So you messed up big time. Or maybe it isn’t that big of a deal. Either way, it’s consuming your mind and eating away at your ego. Learn to let go of that mistake. Realize you are a wonderful individual with so much to offer the world. You have many great talents and have had many successes. Maybe you won the bake sale last year. All casino games have an RTP (return to player) rate. This percentage shows how much money you will lose on a game in the long run. Here is an example: If the RTP rate of a game is 92% and you invest 100 USD, you will be able to recover 92 USD of that investment in the long run. In other words, your losses will be limited to 8 USD.
The information in this article applies to Canadian residents who are not US citizens, and are not US residents.
Contest prizes and winnings from lotteries or gambling are not taxable in Canada, so this type of income does not have to be reported on your Canadian tax return, unless of course you are engaged in the business of gambling. On your Canadian tax return, you cannot claim a credit for any taxes withheld from these non-business income winnings.
If you are a Canadian resident and have had 30% tax withheld from winnings from a contest, according to the Internal Revenue Service (IRS), you cannot recover this money.
If you are a Canadian resident and have had 30% tax withheld from lottery or gambling winnings in the US, some or all of the tax can be recovered if
| you also have US gambling losses to offset some or all of the winnings, or |
| tax was withheld from winnings from blackjack, baccarat, craps, roulette or big-6 wheel |
All of the links in this article are to documents on the website of the IRS, and most of the links are to pdf files.
In order to get a refund of US taxes withheld from lottery winnings or gambling winnings, Canadian residents must file a US tax return. The US tax return to be filed is
| Form 1040NR - US non-resident alien income tax return. |
Your lottery winnings, and gambling winnings and losses will be recorded on Schedule NEC (part of Form 1040NR), as long as you are not engaged in the trade or business of gambling. Read:
| Instructions for the 1040NR, and |
| Instructions for Schedule NEC, included in the 1040NR instructions. |
Gambling and lottery winnings for residents of Canada are included on line 10a of Schedule NEC. Proceeds from lotteries and raffles are also included on line 10a, but winnings from blackjack, baccarat, craps, roulette, or big-6 wheel are not included here. Gambling losses are entered on line 10b, with net gambling income (zero if negative) entered on line 10c.
If you have winnings from blackjack, baccarat, craps, roulette, or big-6 wheel, and the casino gave you a Form 1042-S (Foreign Person’s US Source income subject to withholding) showing that tax was withheld, enter these winnings in column d of line 10, with a tax rate of zero%. You can claim a refund of the tax.
If you do not already have an individual taxpayer identification number (ITIN), you will have to apply for one. The application form is
| Form W-7, and the instructions for the form |
See also:
| Publication 1915 – understanding Your IRS Individual Taxpayer Identification Number (ITIN) |
Your 1040NR tax return must be attached to the application form W-7.
More IRS Information:
| US Tax Guide for Aliens – publication 519 |
Revised: February 02, 2021
The browser does not support JavaScript. Please access the web page using another browser.One of the most common pieces of gambling advice I’ve read over the years is to stop chasing losses. It’s generally good advice. When you chase losses sometimes you get a big win to dig out of the hole. But sometimes you keep losing and dig a hole so big that you can’t get out.
Is there ever a time where chasing losses is acceptable?
Most gamblers who start chasing losses are reacting to the situation without a plan. They get behind and scramble to make up their losses. This is a dangerous habit, and eventually they get unlucky and lose more than they can hope to recover.
If this is how you chase losses, you should stop. However, if you have a plan before you start gambling, you can incorporate chasing losses into the plan in a way that protects at least part of your bankroll and gives you a chance to hit a nice win from time to time.
Why do players chase losses?
One of the reasons is that they fall into the gambler’s fallacy trap. The gambler’s fallacy is the belief that recent results predict near future results. The problem with it in terms of gambling is that players try to apply it to random events, and it simply doesn’t work.
Here’s an example:
You’re playing roulette and the last five spins have been black. You believe that red is due because it hasn’t hit in five spins. So you bet on red. If black hits again, you believe that red is even more due to hit, so you up your bet on red.
Red and black hit on an equal basis in roulette, but it only happens in a true 50/50 percentage as the number of spins approach infinity. The fewer number of spins that you consider, the less likely that the distribution will be 50/50.
The truth is that every spin of the roulette wheel is an independent event. It doesn’t matter what has happened in the past, because the odds of the ball landing on red or black are the same on every spin.
In this example, let’s say that you bet on red after five black in a row and the next spin is red. This reinforces your belief in the gambler’s fallacy and leads you to make the same mistake again.
Some players believe in streaks, so in the same example they believe that because black has hit five times in a row that it’s more likely to hit again. Both the player who thinks red is coming and the one who thinks black is coming is wrong for the same reason.
How To Recover From A Big Gambling Loss
It’s easy to fall for the gambler’s fallacy, but it’s impossible to predict future results in a random event from past results. Don’t fall into this trap.
The first two sections below show you a way to use loss chasing in your plan, and the third section introduces a way to eliminate the need to chase losses.
1 – Segregate Your Bankroll
My favorite tactic for chasing losses without destroying my bankroll is segregating my bankroll. This is a simple process, and is the best way to chase losses while protecting part of your bankroll. You can use this method different ways depending on your risk tolerance and personal goals.
To use the segregation method, divide your bankroll into two parts. You can divide it into two equal parts or in any ratio that works for you. Use one part of your bankroll to chase losses, using whatever system you prefer, and use the other portion of your bankroll for regular gambling activities.
Here’s an example:
You have a bankroll of $1,000 and divide it into two $500 parts. You use $500 with the Martingale system with the goal of winning half of the $500, or $250, before busting out. In other words, you use the Martingale system and stop when you increase your $500 stake to $750, or you lose the $500.
The other $500 is used to play games without chasing losses. No matter what happens with the first $500, you protect your ability to gamble with the other $500. If you’re able to increase the first $500 to $750, you have $1,250 in your bankroll, which you can use in any way you want.
What I do when this happens is create three separate bankrolls. The $250 win is set aside in its own bankroll which I don’t use right away. I use it as a backup to start using when I get unlucky and lose my $500 Martingale bankroll.
I use the original $500 Martingale bankroll to try to get up $250 again, while the original $500 for regular play is still intact. If I’m lucky enough to get up $250 again, I now have three separate $500 bankrolls. One $500 bankroll is still used for a chasing losses system; one bankroll is kept in reserve for use when the chasing losses bankroll goes bust; and the third bankroll is still in reserve for regular gambling activities.
If you’re lucky enough to reach this point, you can keep playing the Martingale or another system and divide the winnings over the three bankrolls. Another option is to stick with the $500 loss chasing bankroll and build the other two bankrolls, with the hope of getting both of them to $1,000 before busting out chasing losses with the original$500.
When you chase losses using the Martingale system or some other system, eventually you’re going to run into a long losing streak and wipe out your bankroll. When you use your entire bankroll to play you end up losing your original bankroll and all of your wins.
This is a classic example of limiting your upside while having no downside protection. But when you segregate your bankroll, you limit your downside without eliminating your potential upside.
Nothing you do with your bankroll is going to change the long term edge the casino has. You can use a loss chasing system with most casino games in one way or another, but almost every one of the games has a long term house edge you can’t overcome.
You’re going to learn more about this in the final section, but the few games that offer a chance at eliminating the house edge don’t work well with loss chasing systems. In addition, if you can learn how to beat a casino game using strategy and skill, you shouldn’t be chasing losses anyway. It’s much more profitable to play with a long term edge than to chase losses.
If you’re not familiar with the Martingale system, here’s how it works. You start with a low bet and every time you win you make the same low bet the next time. Every time you lose a bet, you double your next bet. You use bets that pay even money, like betting on black at the roulette wheel.
If your base bet is $10, you make a $10 bet for your first wager and you make the same $10 wager after any win. When you lose a bet, you double the amount for your next wager. So, if you lose a $10 wager, your next bet is $20. When you lose a $20 wager, your next bet is $40.
How To Recover From A Big Gambling Losses
Every time you win a bet you have a $10 profit. If you’ve lost a few hands in a row and your bet is $40, when you win you get $40. This covers your loss at the $10 and $20 level, for a total of $30, leaving a profit of $10.
The system is simple and every time you win a bet you have a profit equal to your base bet. On the surface this seems like a sure way to make money, but the problem is eventually you’re going to lose so many decisions in a row that you run out of money or you run up against the max bet limit at the table.
Here are the numbers if you’re using a $500 bankroll to play roulette, starting with a $10 base bet.
- First bet $10
- Second bet $20 for a total of $30
- Third bet $40 for a total of $70
- Fourth bet $80 for a total of $150
- Fifth bet $160 for a total $310
- You don’t have enough money to make a sixth bet with a $500 bankroll
The sixth bet in the string when you lose the first five wagers would be $320, for a total of $630. When you’re playing an even money bet, for example black on roulette, you don’t lose five bets in a row often, but it does happen.
Here’s a step by step guide to how I use the Martingale system to chase losses with half my bankroll:
Sometimes I use the Martingale to play roulette or baccarat, but my favorite use is in sports betting. It’s not quite as simple as playing roulette because you pay vig on losing sports bets, but the concept is the same.
On the first wager I bet $11 to win $10. If I win, my next bet is $11 to win $10. When I lose the first bet my next wager is $24 to win $21.82. When I win this bet, it covers the first loss of $11 and leaves a profit of $10.82.
You can determine the exact bet amounts to cover your previous losses and leave a $10 profit exactly, but I simply round up a bit to keep things a little more simple. I know that with a $500 bankroll I won’t be able to make a sixth bet on a losing string and there’s extra money to bet with on the first five bets. You can see this above, where the fifth bet is $160 for a total of $310.
If I lose the first two bets, my third wager is $50 to win $45.45. When this bet wins, it covers the $35 in previous bets and leaves a profit of $10.45.
The fourth bet in a losing series is $110 to win $100. A win covers the previous $85 in wagers and leaves a profit of $15.
If I have to make a fifth wager, I bet $253 to win $230. When I win the fifth wager it covers the previous $195 in losses and leaves a profit of $35.
Remember that any strategy that uses chasing losses will eventually fail. But if you segregate your bankroll and use loss chasing as one part of your overall strategy you can show a nice profit sometimes, while limiting your downside.
2 – Double or Nothing Strategy
Another strategy you can use with chasing losses is the double or nothing strategy. It’s a simple strategy and is you use it every time you gamble you either double your starting bankroll or lose it all. The thing that sets this strategy apart from how most players gamble is that you know what your possible outcomes are before you start.
To use the double or nothing strategy, you start with a set bankroll and make bets until you double up or go broke. One way to do this is to make a single even money bet with your entire session bankroll.
Here’s an example:
You decide to use the double or nothing strategy with a session bankroll of $320. This means that you’re leaving the casino with either $640 or nothing. You find the roulette wheel and place a bet of $320 on red. If you win you double your money, and if you lose you have nothing.
While this works as the system is defined, the problem is that most players want to play for longer. So, instead of making one bet, you can use the Martingale system like you learned in the last section.
Here’s an example:
With the same $320 bankroll, you start playing roulette and make even money bets. You start with a bet of $10 and every time you win a spin you make a $10 bet on the next spin. When you lose, you double your next bet. Because each winning bet gives you a $10 profit, you have to win 32 series of bets before you lose five bets in a row.
Here are the numbers for a losing string of bets:
First bet $10, for a total of $10.
Second bet is $20, for a total of $30.
Third bet is $40, for a total of $70.
Fourth bet is $80, for a total of $150.
Fifth bet is $160, for a total of $310.
As you can see, your bankroll of $320 allows you to make five losing bets in a row.
Another way to use the all or nothing system is to divide your bankroll into individual bets and every time you win you let it ride, in hopes of winning a series of bets long enough to double up. This isn’t exactly the same as chasing losses, but it is the same concept. Instead of betting that you won’t lose a number of decisions in a row, you’re betting that you win a number of decisions in a row.
Here’s an example:
You have a $320 bankroll for the session and decide to divide it into 32 bets of $10. You play roulette and decide to bet on black every time. When you win, you bet your original wager and the win on black again. You keep doing this until you double your bankroll o a winning series, or when you lose you start over with another $10 bet.
Here’s how the numbers work:
You win a $10 bet, so you now have $20 in this series. You bet the entire $20 on the next bet and win, so you now have $40. You bet the $40, and if you win you have $80. Winning the next bet of $80 gives you $160. If you win the $160 wager, you have $320.
You can use many different variations of the double or nothing strategy to add variety to your gambling. Most of the time you’re going to lose your entire session bankroll, but sometimes you’re going to double up.
This strategy works best with even money bets, but you can use a variation of it with most bets. I use it with sports betting and blackjack sometimes for a change of pace.
3 – Change the Game
Most gamblers are tempted to chase losses from time to time. If you use it as part of your overall plan and know what you’re going to do when you start, at least you have a realistic view of the possibilities. But the best way to gamble is to never put yourself into a position where you have to chase losses.
One way to do this is to find games with a low house edge that you study until you learn exactly what to expect every time you play them. The other way is to stop playing some games, and concentrate on ones that let you have a realistic chance to win.
Here’s a list of gambling activities that help you eliminate the need to chase losses.
- Blackjack
- Poker
- Video poker
- Sports betting
- Horse racing
- Dog racing
- Esports betting
- Daily fantasy sports
Blackjack has a low house edge when you can find games with good rules. It also has the added benefit of being beatable if you learn how to count cards. Any game that you can beat eliminates the need to chase losses, because you grind out a small profit over time by simply sticking to your plan.
Poker is another game that gives you a chance at long term profit. You can learn how to play well enough to beat most of your opponents, locking in profit over time.
Sports betting, horse racing, dog racing, esports betting, and daily fantasy sports all offer a chance to show a profit for smart bettors. Most bettors lose, but a few are able to study and learn enough to show profits over time.
Video poker is a little different than the other things on the list, because it’s almost impossible to beat in the long run. But it does offer a great alternative to games that lead to chasing losses because it’s predictable and still gives you a chance to hit a nice win from time to time.
Different video poker games and pay tables offer different house edges, but it’s fairly easy to find ones that have an edge of less than 1%. You have to use the best strategy on each video poker game to keep the house edge low, but you can buy strategy cards to keep this simple.
The reason I say that video poker is predictable is because you can figure out your expected loss based on the game, pay table, and the size of your bets.
Here’s an example:
You play 9/6 Jacks or Better and use the proper strategy enough to keep the house edge at .5%. If you bet $1.25 per hand and play 300 hands per hour, your expected loss per hour is only $1.88. Some hours you’re going to lose more than this, and some hours you’re going to win, but the long term results are predictable.
In addition, when you hit a royal flush you can end a playing session with a nice profit for the day. When you bet five coins on each hand the royal flush pays out 4,000 coins. In the example above, you’re betting five quarters per hand, so a royal flush pays $1,000.
Even if you choose to use one of the strategies in the first two sections, you can switch games or bets to change things up. You already know that roulette offers many even money bets, but you can bet the pass line or don’t pass line at the craps table, or the player bet on baccarat also. You can even use one of the strategies above to play blackjack or bet on sports with slight adjustments.
Conclusion
Chasing losses eventually leads to a loss, but if you incorporate it into your overall strategy you can chase them to add variety without destroying your bankroll. The better option for some gamblers is to change the game so they never have to worry about chasing losses, but the final decision is yours. Avoid falling into the gambler’s fallacy trap, and start with a plan and you’re going to be better off than most gamblers.