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2019 Tax Season

BartBart Posts: 5,683AdministratorLeadPro
Hey guys,

Over the last 10 years I have been filing as a professional gambler with an LLC and have gotten fairly familiar with the way that gambling taxation is handle. This post is for any questions that you might have and I will do my best to answer.

I also want to point out that I recorded two free podcasts on this topic with my tax accountant who specializes in gambling, Russ Fox. http://www.crushlivepoker.com/podcasts/gambling-taxation

In general, people have two options to file gambling winnings.

OPTION 1: Casual Player. 99.9% of people fall into this category.

This means you aren't a business, so there are no business deductions like travel, food, training, etc. You must report all gambling winnings as "Other Income" on Form 1040. You may deduct gambling losses only if you itemize your deductions on Form 1040 and kept a record of your winnings and losses. You do not "net".


OPTION 2: Professional Gambler

The other option is to file as a "professional gambler" and a schedule C. Since you are a business you can deduct business expenses. However, you must pay an additional 15.3% Self Employment tax. Here you can "net" wins and losses.


Most people do not have a choice. There is a criteria that needs to be met for the IRS to consider you a professional gambler. However, some people will have that option. In general if you don't do a lot of traveling for poker the "casual" choice is better. But in the new republican's tax bill the standard deduction has been doubled to $12,000 per person. If you don't have a mortgage on a home chances are you would want to NOT itemize your personal deductions and take this $12,000 tax liability reduction. The wrinkle, though for the casual gambler, is that if you want to deduct your gambling losses from your wins you must itemize your deductions, as gambling losses are a form of an itemized deduction. So you could have a situation where losing gambler wins $5000 on a jackpot, but is down overall for the year. You would think that he would want to offset that win with a $5000 gambling loss. If he does that, however he doesn't get to take the $12,000 standard deduction.

Don't confuse this personal deductions with business deductions. If you are a professional gambler you get to make business deductions that effect your liability and personal deductions (standard deduction). The two are separate. But remember you are paying an extra 15.3% in elf employment tax, that is a combination of Social Security and Medicare on your first $128,400 and then 2.9% above that figure.

Comments

  • ActionTwin Posts: 146SubscriberProfessional
    Do you know what Russ charges per hour? I may be getting a new accountant for next year.
  • BartBart Posts: 5,683AdministratorLeadPro
    ActionTwin said:
    Do you know what Russ charges per hour? I may be getting a new accountant for next year.
    He's pretty reasonable. I don't know his hourly, no. He is also a very straight shooter. He's not going to tell you how to cheat or misfile or any type of shenanigans. Its probably too late to file a return with him for 2018, but you could always email him and tell him you want to file an extension. This gives you until Oct 15th to file but you still have to pay estimated taxes for the previous year by April 15. rcfox@claytontax.com
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