Can I deduct purchases at an online sweepstakes casino?

Question

I played on an online casino that is legally considered a sweepstakes. In order to deposit, you needed to make a purchase of a social currency which has no value. However, these purchases would provide you with a "free gift" of another currency that can be redeemed for cash once you wager it (essentially using a loophole to not be legally considered gambling). I managed to withdraw approximately $800 from the site which I plan to report as gambling/sweepstakes winnings, however because the casino uses a sweepstakes model I am confused on whether my purchases from the site are considered gambling wagers and therefore can be reported as an itemized deduction. Thanks in advance.

CoryF · Accepted Answer

Hello,

Purchases made in the guise of creating social currency are not deductible and would be seen as a Personal expense (also not deductible) in the eyes of the IRS. The only reportable items are gambling winnings and losses. You can read this in Topic no. 419 on the IRS website.