Taxes and quitting while you're even.

[RikaKazak]

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Mods, there is so much misinformation here can you delete this thread. I hate it when people who have no idea what they're talking about comment like they know the tax code.

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If you have something to back up your accusations, you should present it. Do you dispute that gambling winnings must be declared as income, while losses are itemized deductions? Or is there something else that you don't understand?

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I'm not a CPA, so I won't go on to explain, but what you stated and I quoted i'm not arguing with, it's something else you're missing/wrong on, maybe a certified CPA could jump in and explain it.

[Jim Easton]

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I'm no tax expert, but I think I've read posts here where some people who itemize deductions are able to deduct their gambling losses as ordinary deductions, but for some reason they don't get the full value of the deduction.


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You have to itemize to deduct gambling losses. By switching to itemizing, you "lose" the standard deduction. If you already itemize (think mortgage interest), you should still get the full value of the losses.

[Tilt]

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You all are making this entirely too complicated. Gambling income is one piece of your total gross income.

Get a sum total of wins/losses for the year. If you're in the black, it counts as taxable income. If you're a net loser, you don't need to report anything (as gambling losses are only deductable up to the amount you've won). This number is added to the income you have on your W2, interest income, etc. to calulate your total gross income. Once your total gross income is figured out, THEN handle your deductions. Gambling losses should already be figured into your winnings in the first step.

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My god this is so wrong.

[Guthrie]

If you identified what that "something else" is, then it could be corrected, or at least discussed. Asking the moderators to delete a thread because of some unidentified error that only you are aware of seems rather absurd.

That's sort of the purpose of a forum.

[Guthrie]

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I'm no tax expert, but I think I've read posts here where some people who itemize deductions are able to deduct their gambling losses as ordinary deductions, but for some reason they don't get the full value of the deduction.


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You have to itemize to deduct gambling losses. By switching to itemizing, you "lose" the standard deduction. If you already itemize (think mortgage interest), you should still get the full value of the losses.

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True, but I think it's safe to say that a large number of 2+2ers are young single men who don't have a mortgage or other significant itemized deductions. Many people also find that their mortgage interest deductions are less than the standard deduction and take the standard anyway.

It also appears that there are other situations where your gambling losses might prevent you from getting full value from your other itemized deductions.

http://www.onlinepokerfaq.com/guide/tax-sessions.html

[Beavis68]

http://www.wwwebtax.com/income/gambling_winnings.htm

Gambling winnings are fully taxable and must be reported on Form 1040, Line 21 if you are not a professional gambler. It is important to keep an accurate diary or similar record of your gambling winnings and gambling losses.
If you itemize your tax deductions on Form 1040, Schedule A, you may deduct any gambling losses up to the amount of your gambling winnings on your tax return. If you have no gambling winnings for the tax year then you cannot deduct your gambling losses on your tax return. The tax deduction on your tax return is not subject to the 2% AGI floor.

Gambling winnings from lotteries and raffles are taxable gambling winnings on your tax return. In addition to cash gambling winnings, you must include on your tax return bonds, cars, houses, and other non-cash gambling winnings at their fair market value.

If you win a state lottery prize payable in installments, you must include on your tax return both the annual payments and any amount designated as “interest” on the unpaid gambling winning installments.

Any federal income tax withheld from your gambling winnings should be included on your tax return. Be sure to attach your Form W2-G to your tax return.

[theRabbit]

Things are actually worse for the recreational player. (if I understand all the research I did)

1) It is not clear that you can include as part of your itemized deductions entry fees.

2) Must declare the fair market value of any satellites or prizes you have won (plus any expense money) as income.

3) And even worse; your total winnings (declared on page one of 1040) which are added to your income may subject you to minimum alternate tax. So if you win $400k and loose $400k in a year you may have a huge tax liability even though you have no net winnings (Because of the minimum alternative tax.) You can aggregate wins and losses but must report wins as income on a session by session basis. If you itemize then you can deduct losses only up to the total of you wins income.

4) Also for example I believe if your only income is social security and your winnings exceed 34k you would have to pay tax on 85% of your previously non-taxable social security income.

This is true not only for poker but any other kind of gambling (Vegas, horses, slot, lottery, etc.) on a per "session" basis. No, you cannot think of the year or even your login period as one big session.

I suspect the "bizarre" nature of the tax laws in regards to gambling are turning a large portion of the millions of people who gamble into tax cheats who are playing audit roulette, either because they don't understand the law or don't feel they should have to pay tax on money they didn't win.

I've spent considerable time researching this and believe I am accurate in the above.

You can declare yourself a professional gambler but that can have lots of problems also.

If anyone has accurate information to contradict anything I've said I would like to know where it is?

[obsidian]

I just want to say this is especially true in some states in the upper midwest (including Illinois) that don't allow you to deduct your gambling losing sessions at all (state tax only).

[Niediam]

1) I disagree. This specific topic has came up many times here in the end after some sort of debate people are usually convinced that tournament entry fees are deductable.

2)Of course... this isn't any different than if you went on Wheel of Fortune and won a living room set or a trip to Spain. [img]/images/graemlins/smile.gif[/img]

3)I know nothing about MAT... do you happen to have a link
on the subject? Does this possibility only matter if we are filing as a recreational gambler as opposed to a pro?

4)Considering what social security is intended for I suppose this makes sense. I assume your filing status doesn't matter here.

[ilovebadbeats]

You have it totally backwards!

It BENEFITS YOU, THE PLAYER, to quit while you are in the hole - the deeper the better! (each
and every session!)
The higher your losses the better! (as this saves you money when you go to pay your taxes!)

The thing you want to minimize is your winnings (in individual "sessions" - whatever it is that YOU determine a "session" to be).
Individual BIG winning sessions (i.e., large "upswings") are bad, because you are forced to
aggregate all of your winning sessions. BECAUSE OF THIS FACT, IT IS IN YOUR BENEFIT to keep playing and lose some money back (not intentionally - you are still playing your best/+EV poker - you are just trying to end the session with a little less profit for tax purposes) to the players
at your table.

So, individual big winning sessions are bad for you and you should try to limit them, while
BIG LOSING SESSIONS ARE GOOD FOR YOU and you should intentionally STOP playing when you are really stuck and immediately report that as a complete/-ed session. Get it?

That way you'll have a higher amount to deduct and a lower amount of gross winnings.

You are also free to determine what a "session" is. It is in your benefit here to
keep your sessions as long as possible in general (while occastionally "stoping short" when you are extremely stuck and continuing to play longer when you are extremely ahead in order to implent what I recommended above), to get what it is YOU REPORT as close to your actual "net winnings" as possible (the person who determines
(illegally) that a session is 1 year is, in effect, reporting his/her net winnings).

The goal here is to get what it is you report as close to your actual net winnings as possible, right?
(or have "I" totally lost it?)
(reading this post might have really confused me, but I think/am pretty sure I am right here...)

Telling people that they should play through and not report their downswings as sessions is
nuts.
Are you intentionally giving people the wrong advice?