I know that you gamble periodically. That prompts me to share three basic tax rules on gambling.

Rule 1: Your winnings are taxable. Your gambling income is taxable. And—just as important—it’s reportable.

For example, when you win $1,200 or more from a slot machine, the casino must report your winnings on Form W-2G and send a copy to you and the government. With this tool, the government knows when you don’t report enough gambling income on your tax return.

Rule 2: Keep records of your losses. You can offset your gambling winnings with your gambling losses—but you have to keep good proof of those losses. The IRS and courts expect you to maintain a “contemporaneous gambling diary.”

You face specific rules for a gambling diary depending on the type of gambling. For example, with slot machines, the IRS advises that you record the machine number, date, and time played to support your winnings. Often, you can find the machine number clearly displayed on the machine. If not, simply ask the casino operator for the machine number. (A good player card will automatically do this for you.)

Rule 3: You cannot claim net losses. If your gambling losses exceed your winnings, you get no deductions for your net loss. Further, the net loss does not carry forward. It simply disappears.

For example, let’s say you won $15,000 on a particularly good day at the casino, but over the course of the year you lost $20,000. You can report $15,000 of those losses (that is, up to the amount of your winnings). As for the remaining $5,000 in losses, you can’t carry them forward or back. For tax purposes, they disappear.

As you can see, you need to know how the rules work if you gamble. I don’t want to see you reach the end of the year with lots of income on W-2Gs and no appropriate tax records for your losses.