In a previous post, we looked at the many ways in which taxes apply to gambling, whether at a casino or during a friend’s poker night. With that information in mind, here are some useful tips on how to navigate the complex world of tax law as a poker player.
File as a Professional Gambler
Though it may seem counterintuitive, there are some benefits to announcing yourself as a legal gambler (which has been a recognized occupation since a U.S. Supreme Court ruling in 1987). First, professional gamblers can, in some instances, deduct expenses incurred while gambling (such as admission fees, travel expenses, lodging, etc.). Second, unlike amateur gamblers, professionals can actually net their gambling wins.
Be aware however that filing as a professional gambler leaves you open to some additional scrutiny from the I.R.S., in the form of audits, and should be seen as a long-term career decision; switching back-and-forth between amateur and professional status, can throw up red flags with the I.R.S. and subject you to immediate audit. Needless to say, this is a big decision that should not be done lightly. You should seriously consider whether you really want to make gambling your livelihood.
Consider Moving to Another State
Depending on how serious you take your gambling career, you might want to keep in mind that certain states are, in taxation terms, friendlier to gamblers than others. The seven states that do not have a state income tax – Alaska, Florida, Nevada, Texas, South Dakota, Washington, and Wyoming – are good choices (with Nevada being an especially obvious one). New Hampshire and Tennessee are other options, as their income taxes affect only dividends and interest.
High-tax states like California and New York are not so friendly with their high state income taxes, while other states like Connecticut, Illinois, Massachusetts, and Ohio do not allow deductions for gambling losses on the state income tax. Instead, you have to contend with a gross receipts tax on your gambling wins – even if you have lost overall. Again, if gambling is a serious enough pursuit, moving to another state may be worth considering.
Remember How the Rules Apply
Contrary to popular belief, the tax code applies to gambling winnings earned both in brick-and-mortar casinos and in the online kind (although the rules for the latter remain a bit murky). That means turning to the popular avenue of Internet gambling will not save your from the I.R.S. Many gamblers avoid what could be an otherwise lucrative career in casinos or competitions in the mistaken belief that the alternative will save them money. Just know that either way, you will have to file and pay something.
Turn to an Expert in Tax Law
Given the complexities of tax law, both with respect to gambling and in general, your best solution is to turn to a qualified and experienced tax lawyer. David Bauer of the Bauer Brofsky Law Firm, one of the finest South Florida Law Firms, has proven expertise in all tax matters, as well as probate, asset protection, estate planning, and more. There is no substitute for a well-practiced and versatile South Florida Tax Lawyer like David Bauer, whose specialty in personalized wealth management solutions can also pertain to gambling winnings.
For more information, please contact us at (305) 712-7979 or firstname.lastname@example.org.