States hold lotteries to fund education and other benefit programs for residents. Scratch-off tickets are an instant win lottery where buyers scratch off areas on the ticket to discover if they have won. The cost of scratch-off tickets vary depending on the amount of the grand prize for the game.

Federal Taxes

The federal government allows taxpayers to deduct the cost of lottery tickets if the taxpayer meets certain conditions. If you claim winnings as income, you can deduct the amount of your ticket purchases up to the amount of your winnings. You must itemize your deductions to claim the purchases. If you claim the standard deduction, you cannot claim the cost of scratch-off tickets.

State Taxes

Individual states differ in their laws regarding deducting the cost of scratch off tickets. Seven states – Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming – have no state income tax. Of the other states, some like Wisconsin do not allow you to deduct the cost of tickets. A tax professional will be able to advise you of the rules in your state.

Claiming the Cost of Tickets

Claim the amount you are deducting as a miscellaneous deduction using a federal Schedule A form. You must retain your proofs of purchase – tickets, receipts and or statements – in order to prove the deduction in the event of an audit.

Tracking Purchases for Deductions

Keeping a log of lottery tickets you buy and any winnings will help you when tax time comes. Use a notebook or spreadsheet and be sure to include the date, purchase price, place of purchase and the amount of any winnings. If you are using a notebook for your log, you can attach your proof of purchases to the log sheet.