Checking in on a pretty niche US tax question to see if any of my fellow tax-conscious American poker players have happened to learn anything about this in their lives.

Are there any potential implications of amateur poker income on the decision of a married couple to file their income taxes jointly vs. separately? Should the existence of poker income ever change the decision of how a married couple chooses to file?

I’ve done my research and, unsurprisingly, haven’t found anything on this specific issue. My general understanding is that filing separately is rarely correct, with the most common exception apparently being when one spouse has large itemized deductions of certain types. I have no idea if the large itemized deductions from amateur poker income would be under consideration for this, but certainly, if they are, there's a potentially big impact on how to file. Does anybody know? http://online.wsj.com/article/SB1000...3DINVESTOR0608

Any other potential mysterious points of impact of amateur poker income on jointly vs. separately? If I've learned one thing about US poker taxes, it's that poker income interacts counterintuitively with all sorts of things.

I’ll get this thread into the sticky if anything useful comes out. Thanks!

Also, mostly-related and worth a repost:

Both members of a married couple lose their standard deduction from a single spouse's large itemized deductions, even if filing separately (hence, relative to normal income/deductions, marriages including an amateur poker player are less incentivized to file separately):

http://forumserver.twoplustwo.com/57...ouple-1149134/

Also to consider:

For unmarried couples, the large AGI for an amateur player could affect their tax picture under Obamacare if they are planning to marry. For instance, these two:

Investment Income Surtax: If your gross income is more than $200,000 ($250,000) for joint filers, you'll pay a 3.8% surtax on your "investment income." That includes dividends, interest, rent, capital gains, annuities, and house sales. While middle class Americans normally would not get hit by this, the sale of a home could trigger this tax in a given year. [If the non-player has large investment income, the large AGI of the player would trigger this surtax on the non-player if married.]

Itemized Deduction Limit: Now we're getting to the Obamacare taxes that will affect everyone. Starting in 2013, the itemized deduction limit for medical expenses will rise from 7.5% to 10% of adjusted gross income. That means you'll need to spend more than 10% of your AGI on medical expenses before you can deduct any of it. [If the non-player has large medical expenses, the large AGI of the player would impose a much higher dollar threshold on the non-player's medical deduction if married.]

http://moneymorning.com/2012/08/05/w...han-you-think/

This may affect whether or not it makes financial sense for the couple to get married.

I'm not sure yet, but there may also be a difference in insurance premium subsidies under Obamacare for such couples, i.e., no subsidy if married due to large AGI of the player, but the non-player would be subsidized if they remain unmarried.

It may even make financial sense for some married couples to get divorced!

Very true and worth noting. I'm past that particular decision point, unfortunately.

Without investigating too much, I would say the married vs single is absolutely critical now. Personal exemptions and itemized deductions now phase out for high income earners (250k single, 300k/150k MFJ/MFS). Thankfully, gambling losses do not phase out along with a handful of others. State taxes paid do phaseout, so the decision to pay your state estimated taxes before/after Dec 31 is important, especially if you think you had a great/poor year as far as income and especially with the new net investment and medicare taxes. Reducing income (legally) in certain years is going to be more important than ever.

Keep in mind you are married if you have a state recognized common law marriage.

The net investment tax is going to sneak up on some people too. It won't be a huge burden unless you derive a lot of income from investments. Rental properties income may or may not be considered for this new tax. Long story short, talk to a professional on that subject.

The decision of MFJ vs MFS usually comes down to one spouse having high income and the other having a lot of deductions that are reduced by adjusted gross income (AGI) such as medical, casualty, and misc.

Essentially, the person with the deductions wants a low income so they get more of the deductions. If filling MFS, both parties must itemize or take standard deduction. This may be a consideration for poker players' past tax years if they took a casualty loss on Cereus Network or lost funds in an ewallet.

Ah, that would be consistent with the generic mainstream advice, in which case amateur poker deductions wouldn't be a consideration. Thanks LT22!

Can't overstate how important the other new Obamacare taxes are, for sure.

A couple of other points not yet mentioned:

1. The research service I use notes that under ObamaCare if you're married and file separately, you are not allowed the ObamaCare tax credit (for health insurance).

2. Individuals residing in community property states (AZ, CA, ID, LA, NV, NM, TX, WA, WI) need to take care if married filing separately. Generally, the income from each spouse must be split 50-50 for both spouses unless the income was derived from separate property. (This can get far more confusing--well beyond what I want to write on a message board.) Add in the fact that the IRS has, in the past, rarely processed MFS returns correctly for individuals filing in a community property state and you have a headache waiting to happen. (Note: The IRS added Form 8958 for 2012 returns. It's too early to know whether this new form aided the IRS in processing these returns. It certainly couldn't have hurt....)

The points that others have brought up--the new ObamaCare taxes and the marriage penalty--are absolutely accurate. We've been telling our clients in our newsletter that they may be unpleasantly surprised by their 2013 tax bill: ObamaCare taxes, an increase in the self-employment tax (to 15.3% from 13.3%), a new higher tax bracket, and the return of phase-outs of exemptions and some itemized deductions (but thankfully not gambling losses) are not going to make 2013 taxes better than 2012.

-- Russ Fox

Good stuff, Russ, thanks a bunch!

I should also note you lose some potential deductions/credits when filing MFS at the federal level.

I was just thinking about this thread again and this point came to my mind (I didn't see it the first time on my phone.)

This is especially key since a lot of professional poker players call Nevada home.