[mtgordon]

I think this was posted around tax time last year. Suppose you won 10k. Now you go and coin flip someone for 10k. Some people were under the impression that it would make the coin flip +EV since they are only risking 7k (assuming 30% tax). However they didn't realize that if they won they were only really ended up with 14k because they still have to pay tax on that winning as well.

To look at it a different way, just to coin flip someone is -EV since you are risking 10k to win only 7k since you have to pay taxes. Being able to deduct the 10k as a gambling loss does increase the EV, but only to the break even point.

To apply this to entering a poker tourney you need to realize that you are only going to be winning 70% of what the 'prize' is and typically you are risking whatever the buy-in is. However, if you can write off your loss then you are only putting up 70% of the buy-in yourself.

Cliff Notes: Whenever entering a tournament realize you are only winning around 70% of what you probably think you are. Whenever you can write off the loss you are only paying 70% of the entry fee so it does increase your EV.