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Lets compare 2 poker players that have both made 600k profit in 4 years. Player A plays cash and consistently makes 150k a year. Player B only plays tournaments and has the following years:
Year 1: +$600,000
Year 2: -$275,000
Year 3: +$450,000
Year 4: -$175,000
Lets compare 2 poker players that have both made 600k profit in 4 years. Player A plays cash and consistently makes 150k a year. Player B only plays tournaments and has the following years:
Year 1: +$600,000
Year 2: -$275,000
Year 3: +$450,000
Year 4: -$175,000
Player A's taxes
Year 1: owes $37,661
Year 2: owes $37,661
Year 3: owes $37,661
Year 4: owes $37,661
$150,644 over 4 years.
Player B's taxes
Year 1: owes $203,013
Year 2: owes $0
Year 3: owes $145,439
Year 4: owes $0
$348,452 over 4 years. https://smartasset.com/taxes/income-taxes#Wf8IQIsb7d
Year 1: owes $37,661
Year 2: owes $37,661
Year 3: owes $37,661
Year 4: owes $37,661
$150,644 over 4 years.
Player B's taxes
Year 1: owes $203,013
Year 2: owes $0
Year 3: owes $145,439
Year 4: owes $0
$348,452 over 4 years. https://smartasset.com/taxes/income-taxes#Wf8IQIsb7d
And that’s being generous because I assumed there were 0% state taxes. If these players lived in California, Player A would pay $193,432 over 4 years. Player B would pay $447,464 in 4 years! That’s right, 74.6% of this player’s 4-year profits would be eaten in taxes!
Many of you are thinking…”wow, taxes suck”. But that is not the point.
The main point is that lowering your annual variance is extremely beneficial to your long term wealth. Having a winning year should be a top priority so you can fully utilize all of your tax deductions.
The main point is that lowering your annual variance is extremely beneficial to your long term wealth. Having a winning year should be a top priority so you can fully utilize all of your tax deductions.
Just remember: If you mostly play high variance poker tournaments for a living, your costs are higher than you realize. And I’m not talking about your mental stability, emotions and relationships (though these will bare costs as well), I am literally talking about your taxes.
How to lower annual variance:
-Sell action
-Play more cash
-Play smaller field tournaments
-Make deals at final tables
-Swap and/or sell final table equity
-Keep track of your earnings monthly and take more/less risk later in the year
-Sell action
-Play more cash
-Play smaller field tournaments
-Make deals at final tables
-Swap and/or sell final table equity
-Keep track of your earnings monthly and take more/less risk later in the year
Additional Finance Strategies:
-If you’re having a losing year, sell some of your stocks, bitcoin or other assets that allow you gain revenue tax free which offsets your losses
-Put money in a 401k when you have a monster year
-If you’re having a losing year, sell some of your stocks, bitcoin or other assets that allow you gain revenue tax free which offsets your losses
-Put money in a 401k when you have a monster year
-Be cheap when you’re having a losing year because you won’t be able to deduct any of those travel expenses! Slum it up buddy!
-Only be a baller when you know you’ve locked in a winning year and you can tax deduct it.
-Only be a baller when you know you’ve locked in a winning year and you can tax deduct it.
I’ve been saying this for over a decade, but most of the long term successes in poker who have built 7 figure wealth (and kept it) play cash. So many friends have disagreed with me on this issue for a long time; but over the years, many have slowly seemed to accept this as a fact
I’ve seen countless professional players have their wealth swing between 50k and 500k their whole careers and never seem to have that huge breakout they hope for. There are some exceptions, but there are definitely more examples of players who have obtained millions and lost it.
The negative impacts of highly fluctuating income have always seemed to be undervalued in the poker community. Hopefully someone reading this thread has a lightbulb moment.
