Help-Prof. Gambler & Tax Implications
Steve Sample
I could use some advice from some of you "professional" or
"semi-professional" gamblers out there. I appreciate any assistance you
can offer.
Although gainfully employed, I have done quite a biy of gambling over
the years. (It's my real enjoyment!) During the past year or so, I
received W2-G's, etc. for almost $100,000.00 for gambling winnings.
There are ways to offset gambling winnings with gambling losses, but on
FEDERAL taxes only! I still have to pay the full state tax "boat" here
in Indiana. And what about the winnings you can't cover with losses!
I'm moving heavily into tournament poker, and I can see that there are
more tax liabilities looming in the future. HELP!
There must be some tax advantages to declaring ones self a "profesional"
gambler. Can I operate my gambling expeditions like a business? Are
items deductible, such as: travel expenses, tournament entry fees,
educational materials, etc.? I have my taxes prepared professionally,
but most CPA's aren't familiar with milking the full advantage out of
some of these "unusual" situations. I just want some general (and
specific too) understandings and guidelines, so that when I am working
with my tax preparer, I can have a good working knowledge of what is
available to me. Can I deduct expenses related to my gambling at the
golf c.c., Churchill Downs (Turf Club membership, programs, racing
forms, etc.), poker tourney trips, casino gambling ventures, etc.,
hotels, airline tickets, meals, etc.???
Excuse my ignorance, but there seems to be no better forum to ask for
this-type advice than this one. [There seems to be a lot of brainpower
out there!] Thanks for your help, and I hope we all win LOTS of $$$$$
in 1999!
HAPPY NEW YEAR!
Steve "JUNIOR" Sample
A southern Indiana river rat
Ken Churilla
>Excuse my ignorance, but there seems to be no better forum to ask for
>this-type advice than this one. [There seems to be a lot of brainpower
>out there!] Thanks for your help, and I hope we all win LOTS of $$$$$
>in 1999!
There is a tax service which claims to specialize in preparing gamblers
tax returns that advetises in Card Player and have a website at
I can't vouch for them, but you might want to investigate. There are also
at least three newsgroups dedicated to taxes where I have seen gaming
income discussed. Just search the groups for "tax" and you'll find them.
Ken Churilla
LinkScan validates links & creates site maps
http://www.elsop.com
Randy Hudson
In article <368BEC78...@iglou.com>, Steve Sample <aa...@iglou.com> wrote:
> Although gainfully employed, I have done quite a biy of gambling over
> the years. (It's my real enjoyment!) During the past year or so, I
> received W2-G's, etc. for almost $100,000.00 for gambling winnings.
> There are ways to offset gambling winnings with gambling losses, but on
> FEDERAL taxes only! I still have to pay the full state tax "boat" here
> in Indiana. And what about the winnings you can't cover with losses!
I am neither an accountant, an IRS agent, nor a lawyer. I'll state my own
beliefs, but you will probably need professional advice anyway.
If your home state does not allow losses to be deducted from winnings, the
effect is that it collects an excise tax on gross winnings. That may reduce
your expectation enough that it's not worth playing. But there may be
back-door ways to get your gambling losses into your state tax return.
One you seem aware of. By filing as a professional gambler, your gambling
income, losses, and expenses all appear on Schedule C, and only the net
profit goes on your Federal tax return. If your state return starts with
Federal Adjusted Gross Income, this effectively gets your gambling losses
off your state taxable income. I'll discuss this more below.
Another way, less well known, depends on your state tax law. There is
usually an area for putting in adjustments to your Federal AGI based on
differences between State and Federal tax laws. For example, interest on US
government obligations is subject to Federal taxes but exempt from state
taxes. Depending on your state law, you may be able to subtract your
gambling losses from your Federal AGI in that section.
> I'm moving heavily into tournament poker, and I can see that there are
> more tax liabilities looming in the future. HELP!
Tournaments are particularly problematic. There have been rulings that
tournament entry fees are not gambling losses, and therefore not deductible
by non-professionals. Tournament winnings are sometimes indicated on a form
1099-Misc rather than on form W2-G, so the IRS may argue those aren't
gambling winnings, only Miscellaneous Income, and you can't deduct gambling
losses from them. Some tournaments (Foxwoods, in Connecticut, was a
prominent recent example) withhold 28% of tournament winnings, if the
winnings were $5000 or more; this can be hard on your cash flow in years
that your profit rate doen't substantially exceed 28%.
> There must be some tax advantages to declaring ones self a "profesional"
> gambler. Can I operate my gambling expeditions like a business? Are
> items deductible, such as: travel expenses, tournament entry fees,
> educational materials, etc.? I have my taxes prepared professionally,
> but most CPA's aren't familiar with milking the full advantage out of
> some of these "unusual" situations. I just want some general (and
> specific too) understandings and guidelines, so that when I am working
> with my tax preparer, I can have a good working knowledge of what is
> available to me. Can I deduct expenses related to my gambling at the
> golf c.c., Churchill Downs (Turf Club membership, programs, racing
> forms, etc.), poker tourney trips, casino gambling ventures, etc.,
> hotels, airline tickets, meals, etc.???
If you conduct your poker enterprise in a businesslike way, the expenses you
incur primarily to advance the business should be deductible as a business
expense. Will you be able to convince a sceptical IRS auditor, or the Tax
Court, that you flew to Las Vegas primarily to play poker, with the
expectation of making a profit? The part-time nature of your poker
activities will make them dubious, especially if you earn a salary of
$50,000 a year plus fringes from your day job, and show only $10 an hour
from a few hundred hours of poker play. The passive-income rules don't
directly apply, but in them the IRS treats 500 hours a year as supporting a
presumption that you are actively engaged in the business in question. I
wouldn't try to claim part-time professional gambler status with less time
invested.
You'll need to honestly report all your income, including some that could be
expected to escape the IRS's attention if you hadn't mentioned it. For
example, the $5 bounties collected for knocking out opponents in the Orleans
tournaments should show up. Such things add to your credibility, and if
they're missing, the IRS need merely assert that your records were not
sufficiently businesslike, and you lose all your Schedule C deductions (you
could then move the gambling losses to Schedule A, with all the drawbacks
you are already aware of).
Also, you'll owe self-employment income on your net Schedule C income. This
can be quite expensive unless you already pay over $7000 in Social Security
taxes at your day job.
--
Randy Hudson <i...@netcom.com>