My guess would be yes, casino comps are taxable, but I wondered what others thought. They can mount up over the year if received on a regular basis.

They are not classified as income. They're more of a "rebate" than anything.

I have read that the IRS has ruled casino comps as taxable. Its the same thing as when you spend points for travel rewards. I was also told this was the reason why the Borgata stopped giving out small promotional gifts like hats and jackets at the poker room. This makes sense because consumer rebates are taxable as income. I suggest you contact your tax preparer for more information, he or she will be better qualified to advise.

I can't see how "comps" can be treated as income when in reality it's a rebate on theoretical losses in a casino. If you lose 100k and are comped 10k worth of items, how could that possibly be taxeable? You really only lost 90k and that money was taxed when it was originally earned by the bettor. (in normal circumstances) I hate the IRS lately.

although in theory I agree with you, the IRS doesn't agree with us

Comps could be treated as income by the IRS (like gambling wins), but if so, they can probably be offset by gambling losses.

This is true, IMO.

Comps would be part of the gross winnings. If gross losses are greater, then there is no taxable gambling income.

For gambling professionals, business expenses would also offset gross winnings. And the comps could have no tax impact depending on what they were used for (e.g., if they were used for a room during a trip, it is a net wash, if they were used for meals then 50% would be considered winnings).

guys "IMO" - which stands for In My Opinion" statements when it comes to tax issues are false and invalid. The only thing that matters is fact, the IRS doesn't care about our opinions.

I'm pretty sure you cannot combine comps into your gross winnings, which are then offset by gross losses. I think read a sample case in Walter Lewis's Gamblers Guide to Taxes. I searched for the book in my home but I cannot find it to verify (but i did find How to Turn Your Poker Playing into a Business by Ann-Margaret Johnston - another great tax book but unfortunately it doesn't cover comps).

I suggest anyone interested in this subject get both books, and contact a qualified CPS such as 2+2's own Russ Fox (send him a PM), Ann-Margaret Johnston or Walter Lewis.

Be careful with CPAs depending on how old they are they may not have been required to understand tax laws when they took their test. But any competent CPA wont give out advice they are not completely sure about anyways (hence the reason I didnt answer the first question)

Also there are some good tax forums (just like this form but for tax questions).

Try MSN's tax corner (google it, it should be the first link)

The CPAs listed in my last post are all respected and trusted within the gambling community. Countless 2+2'ers and pro players have had their taxes prepared by them. I know Russ Fox personally, he does the taxes for a lot of the ARG'ers.

I never said he want respected TT. Actually I have read many of Russ Fox's tax responses and agree he knows his stuff. But if the guy just opend his yellowpages and went to CPA or Accountant some may not know much about taxes. My teacher for advanced financial accounting was a CPA with a Dr. in accounting yet he never took a tax class.

It would appear here that Russ agrees with the position that casino comps are promotional expenses to the casino. Now I'm not 100% sure that extrapolates to comps not being considered gambling income to the pro gambler or not. I am very sure that any income determined to be gambling income can be offset by gambling losses though. Ergo if the IRS did determine your comps to be gambling income there is no provision for them to then disallow offsetting them with gambling losses. Now your State of residence is an entirely different matter.

The IRS link that applies to the above e-mail on Russ's website.

Here is a little background and may either clear things up or cloud the issues. Remember when car companies started "rebates?" Rebates, which used to be bad, illegal things, became good things. Well, the IRS has always taken the position that rebates are taxable income, but price discounts are not.

So the nature of your comp. may impact whether it is classified as a rebate or a discount. Example, when I check in at the MGM and am told: "The casino has comped your room, sir." Because I am not getting a check back, that is considered to be a discount.

Look at the specific nature of your comp. If what you are getting can't be classified as a discount, you are in the zone where you may want pro advice and the comp may be taxable as either a rebate or taxable promotion, just like jackpot winnings.

This make not help you make sense of everything, but is should give you a sense of the history of dispute.

I asked Russ Fox to join this thread, hopefully he will respond soon.

Walter Lewis "Gamblers Guide to Taxes" p.15-18 discusses comps and notes that though the IRS tried to consider comps as income apart from gambling, the courts ruled against the IRS, that comps were in fact deductable when combined with all other gambling winnings, offset by total gambling losses.

I put IMO in my post as TT explains above to make sure that everyone does their own verification (especially with their accountants). My accountant agreed with what I said above as far as comps are concerned - but - because an accountant is liable for penalties when he/she is a signed preparer, it is important to make sure they are in agreement...

Edit: If you are a net winner, comps may have a zero impact depending on what you spend them on and how you are filing. If you file as a business (Schedule C) and use a comp on a casino trip for a room, then it is a wash because you are allowed to deduct the cost of a room. Similarly, you would be able to deduct 50% of comps used for meals. Again this is all "my opinion" based on what I have read, deduced, discussed with my accountant.