Is this Hyperbole or not? (9 Viewers)

[Taghkanic]

… And I’d still like to hear first from some actual high-end poker tax advisors / accountants for an expert opinion.

I assume they will get even more creative than before in figuring out ways to help their clients pay taxes.

The big fish will get the advice they need and dodge it. Ordinary gamblers not so much… But many of them were not reporting to begin with and the stakes will be low enough that most won’t notice.

I only vaguely know one gambler who worries about this stuff. As I recall he set up a corporation to have his winnings go into the company, with gains reduced via various accounting magic, and then he got paid as a “consultant.” But I don’t know how he gets his casino and online winnings passes to an LLC rather than paid directly to himself. Anyone ever do anything like that?

 

[ktran]

… And I’d still like to hear from some actual high-end poker tax advisors / accountants. I assume they will get even more creative than before in figuring out ways to save their clients on taxes. The big fish will get the advice they need and dodge it. Ordinary gamblers not so much… But many of them were not reporting to begin with and the stakes will be low enough that most won’t notice.

I don't think anyone is really arguing it's make or break, it's about what is fair. What they take is already already generous especially if it's someone's main income. Would you do this to another person's business/job?

It's drawing a line so the line doesn't move over time in the wrong direction.

 

[Gus]

My example was $10m was gambled in a year, and the gambler broke even. Not that they were up $10m.

Being taxed on $500k despite breaking even is a big big deal, especially if your total bankroll is only $500k or so (the $10m figure comes from every day buying in, playing, cashing out, etc… not literally $10m liquid in a bank)

My experience is mostly as someone adjacent to stock and crypto day traders where people don’t track things (because it’s boring) and then get absolutely slaughtered on taxes because they didn’t realize what the rules were. Which of course is a different thing than this new gambling tax change, but it rhymes.

 

[Gus]

I do wonder if part of the motivation is to “punish” gamblers who only ever report breaking even, never making money

That $100k cash bet on the golf course between friends that you won? Who would know? It’s just a little fun wager!

When I worked retail I got to see managers who would never have an extra $5 in the till at the end of the night, but half the time would have up to -$10. Other more honest managers would have +/- $10 in either direction because that’s how variance works. The “I’m so honest, and count so accurately that there’s never extra cash in the till” managers were always stealing

Big point being, gambling in high roller tournaments is fairly easily tracked, while cash wagered amongst friends will be tracked when lost but magically forgotten when won

 

[ktran]

I do wonder if part of the motivation is to “punish” gamblers who only ever report breaking even, never making money

That $100k cash bet on the golf course between friends that you won? Who would know? It’s just a little fun wager!

When I worked retail I got to see managers who would never have an extra $5 in the till at the end of the night, but half the time would have up to -$10. Other more honest managers would have +/- $10 in either direction because that’s how variance works. The “I’m so honest, and count so accurately that there’s never extra cash in the till” managers were always stealing

Big point being, gambling in high roller tournaments is fairly easily tracked, while cash wagered amongst friends will be tracked when lost but magically forgotten when won

Motivation is just pure greed. Even if it's "part" of the motivation, it's not a way to go about it. Punishing people who are actually breaking even for the small percentage of people who take advantage of the situation is not the way.

Punishing breaking even is wild. Crazy if this part of the bill doesn't get pulled.

 

[doctorchips]

Apples and oranges. You don’t pay $2,400, you pay tax on $2,400 in income (ex. 25% = $600). Before the change you’d pay on $1,000 in income (= $250).

Yes, that's what I said. That 2,400 includes the loss that you cannot deduct - so the loss is counted as additional income.

"So this means that someone would have to pay tax on losses?"

 

[Gus]

Motivation is just pure greed. Even if it's "part" of the motivation, it's not a way to go about it. Punishing people who are actually breaking even for the small percentage of people who take advantage of the situation is not the way.

Punishing breaking even is wild. Crazy if this part of the bill doesn't get pulled.

I haven't seen any of the justifications/motivations for the new rule. It could be as simple as "big gamblers gamble, and they're not a strong constituency, and so we're going to squeeze them."

I suspect it's closer to "big gamblers routinely under-report their income and you know what? maybe we should tax them a bit more."

More examples: you're playing in a high stakes game and the hotel guys comp you a nice steak dinner and a $1000/night suite, and a limo from the airport next time you're in town. "Hey it's on the house, enjoy yourself here!"

How many high stakes players are reporting this as income? Cash value equivalent or whatever the technical term would be.

I don't know how comps and other perks play into taxable income, and maybe they don't at all. My overall question is "does the IRS have strongly-supported evidence that high roller gamblers frequently under-report their actual income, with plausible deniability given the obscured nature of some of the activities, and thus are often underpaying tax... justifying a tax change that causes them all to pay a bit more than they used to..."

 

[Lil Tuna]

Just ask a meatball………

 

[gmunny]

Whereas I am a CPA, i don't do taxes for a living but I would think any legit professional gambler would be filing a schedule C which allows you to not only deduct losses (still only up the winnings) but business related costs, like travel, meals and entertainment, etc. If this is true this would impact primarily the recreational gambler.

 

[Littleluck55]

I don’t file any gambling losses, and from the confusion and math and suppositions above I’d say most responders to this thread don’t either, because they are upfront about not knowing anything about it.

You can only deduct gambling losses against wins. So if you won $5000, but lost $6000 in another session you can only claim $5000 of the loss because that’s how much you won.
I’ll say it again, under the current law you can only deduct losses up to the amount of your wins. If you go to the casino and lose $5000 you can’t claim any deduction because you don’t have any wins.
It was designed to help offset gains with losses, not to have a bunch of people filing “losses” as it was before. The casino does not file “loss” forms, so nobody knows what you “lost”, it’s an honor system. And everybody cheats in an honor system, that’s why they limit your amount of loss deduction by the amounts you win.

IMHO under the new law, using the example above, if you win $5000 in one session and lost $6000 in another, you can claim your deduction - but only 90% of it. So in this case you can only use $5400 of deduction against your $5000 win and you are still ok, just a shitty gambler.
There is no point in reporting more losses than you win, but this law may make it become a point to report 10% more losses than your winnings

Tax or no tax, if your losses are more than your wins (the only way to avoid the taxes on your wins) then you should just quit calling it gambling and just straight up call it losing.

I think if it’s your “job” to gamble then you may be able to deduct expenses as well.

But deducting anything means detailed records, and I mean pretty detailed. Like dates, times, length of session, casino names, etc…… kinda like a truckers log.

This is what I was getting at. But, I assumed you could only claim up to 90% of $5000 of losses. If you can claim 90% of total Losses and write it off of the $5k, then this won’t affect hardly any rec player. The only time I have claimed gambling wins is if I got a tax form for a $1200 slot machine win. And of course, I had losses to offset it.

The $1200 limit really needs to change. But, that’s a different topic.

 

[Taghkanic]

I keep seeing posts from pros which are like “If I have $7.1 million in winnings and $7.0 million in losses, this new tax code is going to force me out of poker.”

Uh, what should be forcing you out of poker is that you only got a 1.4% return on a $7.1M investment… At a time when you can get 4.5-5.5% yield on a freakin’ money market fund with Vanguard or Schwab.

Hey pros? Play better

 

[Gus]

I keep seeing posts from pros which are like “If I have $7.1 million in winnings and $7.0 million in losses, this new tax code is going to force me out of poker.”

Uh, what should be forcing you out of poker is that you only got a 1.4% return on a $7.1M investment… At a time when you can get 4.5-5.5% yield on a freakin’ money market fund with Vanguard or Schwab.

Hey pros? Play better

they don’t have $7m liquid

If I swing $100k up/down for two weeks, that’s $500k in wins and $500k in losses. Extrapolate out to a full year a the numbers get huge

This is akin to “sales velocity” in retail. You only ever have $100k in product on hand, but your annual revenue could be $5m, with $4.7m of expenses for a net $300k gain. There isn’t ever a point in the year where you had more than $300k liquid that could be invested in treasuries for example

*edit, if they do have $7m liquid, or whatever that number is, it of course makes sense to keep that in a savings account/treasuries yielding ~4%. That’s just a separate income stream though

 

[upNdown]

I'm surprised by how many people here seem eager to minimize this. It's just bad tax law for seemingly no reason. It likely will never affect me directly, but that doesn't make it any less bad.

 

[suchj0sh]

I'm surprised by how many people here seem eager to minimize this. It's just bad tax law for seemingly no reason. It likely will never affect me directly, but that doesn't make it any less bad.

It’s paying more taxes, so yes, can’t be good. I’ve been wondering for a while now how much longer the fed gov will tolerate the rise in gambling with the sports betting boom. Hard to believe they’ve taken so little action against it.

 

[Lil Tuna]

I'm surprised by how many people here seem eager to minimize this. It's just bad tax law for seemingly no reason. It likely will never affect me directly, but that doesn't make it any less bad.

It probably isn’t good “tax law” for folks who just really suck at gambling to begin with.
Probably time for the folks most unhappy with the law to just get a real job and actually keep more of their hard earned money.

Frankly if someone tends to loose so much of their gambling winnings that they need to worry about how to recoup some money back through a tax write off, they’re probably in the wrong occupation to begin with.

Get a real job! It sucks I know but it does greatly uncomplicate the tax part of things.

 

[smashed_potato]

There is some interesting takes going on. I have no skin in the game as I am not a US resident, tax payer or gambler but I have to believe the reason I’m back in poker after the poker boom years is because the industry is succeeding and regs have worked out how to make a living playing poker.

I find it hard to believe that 36 events at this years WSOP being a $5k or more buy-in is happening if liquidity is tight.
I have no idea other than watching Dnegs vlogs at the WSOP that tourney players seem to operate on volume and spreading (hedging) their action (risk).
Players taking advantage of the tax code is 100% legitimate and I have to believe large tournament operators have built business models on that very idea.

Now this in mind a comment on Reddit highlights the tax problem introduced to this premise.

“A more realistic example might be someone who pays $500k in buy ins against $600k in winnings.

Before, they would pay taxes on $100k of profit (around $25k tax bill). Now they’re paying tax on $150k of profit ($37.5k tax bill), while only making $100k of profit.

After tax income was $75k, now it’s $66.5k…so they lost a ton.

Would be even more extreme for someone who buys in $1M per year, while clearing $1.3M in winnings.”

Now someone squeezing out a reasonable living is suddenly doing it a lot harder. Maybe they decide the juice ain’t worth the squeeze no more. How many of these types *are out* there? How do these types getting squeezed affect the poker ecosystem as a whole? Eg people like me showing back up.

 

[Littleluck55]

There is some interesting takes going on. I have no skin in the game as I am not a US resident, tax payer or gambler but I have to believe the reason I’m back in poker after the poker boom years is because the industry is succeeding and regs have worked out how to make a living playing poker.

I find it hard to believe that 36 events at this years WSOP being a $5k or more buy-in is happening if liquidity is tight.
I have no idea other than watching Dnegs vlogs at the WSOP that tourney players seem to operate on volume and spreading (hedging) their action (risk).
Players taking advantage of the tax code is 100% legitimate and I have to believe large tournament operators have built business models on that very idea.

Now this in mind a comment on Reddit highlights the tax problem introduced to this premise.

“A more realistic example might be someone who pays $500k in buy ins against $600k in winnings.

Before, they would pay taxes on $100k of profit (around $25k tax bill). Now they’re paying tax on $150k of profit ($37.5k tax bill), while only making $100k of profit.

After tax income was $75k, now it’s $66.5k…so they lost a ton.

Would be even more extreme for someone who buys in $1M per year, while clearing $1.3M in winnings.”

Now someone squeezing out a reasonable living is suddenly doing it a lot harder. Maybe they decide the juice ain’t worth the squeeze no more. How many of these types *are out* there? How do these types getting squeezed affect the poker ecosystem as a whole? Eg people like me showing back up.

I agree with @upNdown that this is a bad tax law. Of course, I’m not a fan of any new taxes.

But, I assume anyone putting $500k or $1m into tournaments in a year would consider themselves a professional. And operating as a professional/business would open up much more in tax deductions

 

[Gus]

I agree with @upNdown that this is a bad tax law. Of course, I’m not a fan of any new taxes.

But, I assume anyone putting $500k or $1m into tournaments in a year would consider themselves a professional. And operating as a professional/business would open up much more in tax deductions

This is a total blind spot for me.

If you're a salesman and you travel the world selling your wares at conferences, pitching clients, etc... then all airfare, hotel, etc... is a write-off. Expenses required to conduct the business.

However, can one declare themself a 'poker tournament professional' and then deduct airfare, hotel, etc... on top of tournament buy-ins? What about if you're traveling to play cash games? What about private cash games on a yacht, not within the confines of a legit casino? And then again, the prop bets made while playing poker, or while on the golf course. Can you deduct the round of golf as long as you make at least one bet during the round?

I suspect none of this is able to be written off. You're a gambler... OK so you have your wager/buy-ins, and your resulting gain or loss. Balance those, pay taxes on the difference.

Perhaps if you're a sponsored player somehow, and part of your contract requires you to play in 10 major events per year, then expenses related to them could be finagled into business expenses... but I suspect it's much easier if they're simply covered by your sponsor.

 

[Littleluck55]

Yes, you would file as self employed just like any other business owner.

 

[smashed_potato]

But, I assume anyone putting $500k or $1m into tournaments in a year would consider themselves a professional. And operating as a professional/business would open up much more in tax deductions

Wouldn’t other deductions be minimal compared to the volume of win/loss in the tournament arena though?
In the example to make up $8.5k in deductions wouldn’t be easy, would it?

Maybe you could with a fancy accountant but if you are only making $75k a year you ain’t hiring a fancy accountant..?

 

[smashed_potato]

I was playing online back when this little doozy was slipped in.

https://www.cbsnews.com/news/congress-busts-the-online-poker-boom/

All of this came to a screeching halt last weekend, when an unexpected confluence of political events led Congress to stick a provision into a port security bill at the 11th hour — one that's designed to shut down Internet gaming in the United States.

There were no hearings and no debate in the Senate, originally created by the Constitutional framers to be the "world's greatest deliberative body," where the potential passions of the mob as expressed by the larger, more populist House of Representatives, would be slowed down and moderated by the careful consideration intended by the rules of the Senate.

That’s why I’m interested in this… history doesn’t always repeat but it can tend to rhyme.

 

[Littleluck55]

Wouldn’t other deductions be minimal compared to the volume of win/loss in the tournament arena though?
In the example to make up $8.5k in deductions wouldn’t be easy, would it?

Maybe you could with a fancy accountant but if you are only making $75k a year you ain’t hiring a fancy accountant..?

I don’t know, but $8.5k in expenses doesn’t sound like a lot. Per diem for food, airfare, hotel, mileage, etc. Most people buying in $500k or $1m is traveling to play poker. Or at least savvy enough to come up with those expenses.

I think this is going to hurt the rec slot player who gets the tax form for over $1200. Someone who hits a $10k or $100k jackpot. Or a bunch of $1200 jackpots. Most people aren’t claiming winnings unless they have to, which you do with the tax form.

 

[drdr]

I agree with @upNdown that this is a bad tax law. Of course, I’m not a fan of any new taxes.

But, I assume anyone putting $500k or $1m into tournaments in a year would consider themselves a professional. And operating as a professional/business would open up much more in tax deductions

I guess if the deductions are done after the losses are put against winnings maybe it won't be so bad. Does the order matter? Is that order allowed?

 

[Gus]

I guess if the deductions are done after the losses are put against winnings maybe it won't be so bad. Does the order matter? Is that order allowed?

Its the net win/loss during the tax year. Sequence doesn't matter.

 

[drdr]

Its the net win/loss during the tax year. Sequence doesn't matter.

I know that. I'm talking about at which point deductions are done. Probably a regional terminology misunderstanding. Deductions = expenses/costs. So if can claim only 90% of losses and THEN deduct expenses, may not be too bad.

 

[Taghkanic]

I agree with @upNdown that this is a bad tax law. Of course, I’m not a fan of any new taxes.

But, I assume anyone putting $500k or $1m into tournaments in a year would consider themselves a professional. And operating as a professional/business would open up much more in tax deductions

One of the most shared posts about this on X describes the new law then just casually throws in “unless you file as a pro.”

No explanation what that means, but it seems to imply that pros have ways to dodge the new regulations.

But the poster never explains his aside, though it would seem hugely important.

 

[Taghkanic]

View attachment 1530589

Yes, you would file as self employed just like any other business owner.

I’ve seen a very few articles (from before this change) about gamblers using SCorps or LLCs to lessen self-employment and other taxes.

What I am unclear about is how they get casino or online winnings paid out to their company rather than to themselves as individuals.

 

[Taghkanic]

Meanwhile… I read somewhere that as many as 85%-95% of all poker players are losers in the long run, if their games are raked.

And it’s even worse among slot/table game players.

No one wants to talk about that… It’s awkward. (Part of the reason I favor home games.)

So I tend to think a lot of this handwringing is from people who in reality are not going to be paying taxes on their imaginary gambling “wins” to begin with. It may bite a few hundred winning pros, but those guys are doing well enough to be able to handle the increase.

It seems like the main people hurt might be small winners/breakeven players.

 

[suchj0sh]

Meanwhile… I read somewhere that as many as 85%-95% of all poker players are losers in the long run, if their games are raked.

And it’s even worse among slot/table game players.

No one wants to talk about that… It’s awkward. (Part of the reason I favor home games.)

So I tend to think a lot of this handwringing is from people who in reality are not going to be paying taxes on their imaginary gambling “wins” to begin with. It may bite a few hundred winning pros, but those guys are doing well enough to be able to handle the increase.

It seems like the main people hurt might be small winners/breakeven players.

This was also my thought. Hardly any recreational players have wins to claim against lol.

 

[drdr]

Meanwhile… I read somewhere that as many as 85%-95% of all poker players are losers in the long run, if their games are raked.

And it’s even worse among slot/table game players.

No one wants to talk about that… It’s awkward. (Part of the reason I favor home games.)

So I tend to think a lot of this handwringing is from people who in reality are not going to be paying taxes on their imaginary gambling “wins” to begin with. It may bite a few hundred winning pros, but those guys are doing well enough to be able to handle the increase.

It seems like the main people hurt might be small winners/breakeven players.

Certainly what I found in ~2 mill PokerTracker hands; 10% winners, 10% even, 80% losing. But I expect the vast majority of losing players aren't tracking their bankroll to even know they are losing.

It seems like the main people hurt might be small winners/breakeven players.

Think this is spot on. May be an interesting catalyst for some of them to track winnings and improve their game.