If you are staked to play by someone is your income considered gambling winning or wages earned like commission. If say you do a 50/50 split on gambling winnings.

Gambling winnings.

Relevant. I added the bold for emphasis.

^
Excellent response! This is true. The main point that is made by the IRS here is that you can only offset gambling loses to gambling winnings. I also believe that you can't carry over losses to previous or future years. You may only offset winnings with loses in the current year. Is this correct?

This is correct if you are filing as an amateur. If you are filing as a professional, then I think there is some carryover possible (though I'm not sure); and you can also deduct some other business expenses.

No, even a pro cannot carry gambling losses over to future or past years. They can only be taken as a business deduction in the year incurred, up to the amount of gambling winnings in that year.

A pro can deduct legitimate business expenses in excess of net income, and carry over any excess to another year(s).

A professional gambler with a Net Operating Loss (NOL) from business expenses can carry the loss back exactly two years (e.g. from 2014 to 2012) or carry it forward. To carry it forward, a tax election must be made on the timely filed tax return (including extensions).

-- Russ Fox

Thanks, Russ. I have added this to the US Taxes sticky.

I've got a similar question that deals with Daily Fantasy Football.

Here's the hypothetical scenario: Let's say two people share 1 account, 50/50 split (account holder is John Doe). They win a net total of $20k for the year (10k each) and the fantasy website sends a tax form to John Doe at the end of the year stating that he won 20k (in reality he only won 10k due to 50/50 split), and no tax form to the other player. How would you approach this situation when both of them go to file taxes? And let's assume both guys are filing as professional gamblers (John Doe also plays poker separate from the 50/50 split, other guy only plays fantasy).

Thanks.

You can handle it the same way as suggested for backers in staking situations, as covered in the US Taxes sticky.

So any losses accrued in excess of any gambling winnings this year will be lost forever after Dec 31 2015 which stinks to high heaven. It is like a use it or lose it kind of proposition. One could plunk down money in myriad of Vegas tourneys and not cash at all without anything to show for it and eat all the losses at end of 2015. 2016 comes and all that loss goes down the drain and will never be harvested against any offset ever again. That really is such bull but those are the rules.

Gambling in the stock market is way better based on IRS rules b/c any losses incurred there can be carried forward forever until wiped away with gains if and when they occur in the future. Those are under IRS capital gain/loss rules. One can also offset cap gains against ordinary loss too. All that means is offsetting one characterization (type) of income against loss of another (IRS allows individual to deduct $3k of ordinary loss against net capital gains). This all the more minimizes taxes in current year.