There are few experiences more gratifying to a poker player than winning big. As poker continues to grow in popularity, millions of players will feel the impact of tax law, which applies to gambling winnings as it does to any income earned – albeit with some important stipulations.
For starters, all gambling winnings are fully taxable, whether they took place at an establishment or through poker websites; technically, even what you win in a home poker game is taxable, even though in practice, this is hard to enforce. And due to a principle called “constructive receipt”, money is considered income as soon as it comes under your control: thus, gambling winnings are taxed the moment they are credited to your poker account, rather than when they are transferred to your bank account.
Even if earned your gambling winnings overseas, or moved abroad after the fact, so long as you remain a United States citizen, you will have to pay the relevant taxes; the only way to avoid this is to take the extreme option of renouncing your citizenship.
Though literally every dollar of gambling wins is taxable income, you don’t need to file a return if your total income from all sources isn’t enough to owe taxes. Otherwise, the IRS will need to know you got this income. If you win in a casino, that establishment is required to file what’s called a W-2G Form, which informs the IRS of the amount. Any poker winnings gained outside a formal gambling venue can be reported simply as “gambling winnings”.
Contrary to popular belief, you do not report net winnings for the year, but must separately keep track of any wins and losses. Amateur players report these wins on Form 1040, while total losing sessions are reported as an itemized deduction on Schedule A as “gambling losses”. For professional poker players, gambling income is treated like business income, so both “profits” and losses are reported in Schedule C.
Given the complexities of tax law with regards to gambling, an ideal solution is to turn to an experienced tax lawyer like David Bauer of the Bauer Brofsky Law Firm, among the finest South Florida Law Firms in the region. With proven expertise in tax, probate, asset protection and estate planning, David Bauer is an experienced and versatile South Florida Tax Lawyer who offers personalized wealth management solutions for individuals and corporations, including as it pertains to gambling winnings.
For more information, please contact us at (305) 712-7979 or firstname.lastname@example.org