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Gambling and Taxes
Winner, Winner,
!!!
Not so cut and dealt...
***Thread***
Winner, Winner,
!!!Not so cut and dealt...
***Thread***
It’s clear - gambling winnings are taxable in the US.
It’s not clear what the cutoff for winnings is.
Losses are kind of deductible.
That’s all for “casual gamblers,” and everything changes for professionals...
It’s not clear what the cutoff for winnings is.
Losses are kind of deductible.
That’s all for “casual gamblers,” and everything changes for professionals...
If you win $1,000 on a football game and lose $500 at the black jack table the same weekend, what is your taxable income?
Hmmmmm, hard to say.
In general, think about winnings on a per session basis rather than per wager.
Hmmmmm, hard to say.
In general, think about winnings on a per session basis rather than per wager.
Per session
The IRS defines a session as when a gambler places a wager on a particular type of game through the last wager on the same type of game before the end of the same calendar day.
Still not abundantly clear but feels like a day at the casino playing casino games...
The IRS defines a session as when a gambler places a wager on a particular type of game through the last wager on the same type of game before the end of the same calendar day.
Still not abundantly clear but feels like a day at the casino playing casino games...
...could be one session.
Feels like a Sunday betting on several football games on the same platform could be a session.
Feels like a Sunday betting on several football games on the same platform could be a session.
Once you have your sessions figured out, you need to categorize each in terms of winning or losing sessions based on your net haul or loss for each.
Add all your winning sessions for the year. This will go one line 21 of your tax return.
Add all your winning sessions for the year. This will go one line 21 of your tax return.
Wait, what about the losing sessions, don’t I net those from the wins??
No, and this makes little sense.
You can deduct the losing sessions, but only if you itemize your deductions and only to the extent of your wins.
No, and this makes little sense.
You can deduct the losing sessions, but only if you itemize your deductions and only to the extent of your wins.
Examples:
1) Wining sessions = $10k; losing sessions = $5k; and you itemize deductions.
Result, you pick up a net $5k of income.
This feels fair enough.
1) Wining sessions = $10k; losing sessions = $5k; and you itemize deductions.
Result, you pick up a net $5k of income.
This feels fair enough.
Examples:
2) Wining sessions = $10k; losing sessions = $5k; and you don’t itemize deductions.
Result, you pick up $10k of income and none of your losses get netted.
This feels punitive.
2) Wining sessions = $10k; losing sessions = $5k; and you don’t itemize deductions.
Result, you pick up $10k of income and none of your losses get netted.
This feels punitive.
Examples:
3) Wining sessions = $5k; losing sessions = $10k; and you itemize deductions.
Result, you pick up a net $0k of income. $5k of winnings minus $5k of losses and $5k of disallowed losses.
Okay, fine, the government doesn’t want to subsidize your net gambling losses.
3) Wining sessions = $5k; losing sessions = $10k; and you itemize deductions.
Result, you pick up a net $0k of income. $5k of winnings minus $5k of losses and $5k of disallowed losses.
Okay, fine, the government doesn’t want to subsidize your net gambling losses.
Examples:
4) Wining sessions = $10k; losing sessions = $5k; and you don’t itemize deductions.
Result, you pick up a net $5k of income.
This feels super punitive.
4) Wining sessions = $10k; losing sessions = $5k; and you don’t itemize deductions.
Result, you pick up a net $5k of income.
This feels super punitive.
It all changes if you are a professional gambler.
In this case gambling is basically your business and you don’t pick up income on line 21 and you don’t pick up losses in your itemized deductions.
Instead you put both along with all of your other costs (travel, etc) on...
In this case gambling is basically your business and you don’t pick up income on line 21 and you don’t pick up losses in your itemized deductions.
Instead you put both along with all of your other costs (travel, etc) on...
...a Schedule C just like a business.
So in this case you DON’T have the problem of picking up income and no losses (if you don’t itemize) like in Examples 2 and 4 above.
In general, you can’t take a net overall loss on your Schedule C for gambling, but that probably okay...
So in this case you DON’T have the problem of picking up income and no losses (if you don’t itemize) like in Examples 2 and 4 above.
In general, you can’t take a net overall loss on your Schedule C for gambling, but that probably okay...
...because how can your really call yourself a professional gambler if you don’t have net winnings?
Which gets into the all important IRS definition of a professional gambler, which allows for this potentially more favorable tax treatment than the default “casual gambler...”
Which gets into the all important IRS definition of a professional gambler, which allows for this potentially more favorable tax treatment than the default “casual gambler...”
In Comm’r v. Groetzinger, 480 U.S. 23 (1987), the Supreme Court concluded that “if one’s gambling activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby, it is a trade or business.”
Thus, holding yourself out as a professional gambler and potentially getting a more favorable tax treatment may be difficult, but worthwhile if you feel your livelihood is significantly provided for through gambling.
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