The House tax bill has been published, and it is bad for both recreational and professional poker players (and all gamblers):

1. It eliminates the Schedule A itemized deduction for gambling losses.

2. It eliminates expense deductions (i.e business expenses beyond gambling losses) for professional gamblers (those filing a Schedule C).

This is just the first draft of the legislation, which is likely to undergo many changes before votes in the House and the Senate, and it has a tough battle to passage. But it looks really bad for poker players.

This should be of vital interest to the PPA and all poker players.

The AGA, by the way, came out in support of the bill, probably because of the huge reduction in corporate taxes, as well as the elimination of the estate tax (a big boon to Adelson and his family):

House tax plan includes change that could affect professional gamblers, stadium construction bonds

Republican Tax Plan 2017: How the House reform bill hits deductions, brackets & the middle-class

Note: #1 above can be solved by adding this to the legislation:

This would make it so only net poker winnings for the year would be reportable as income.


Mod edit: some of the above statements have been questioned and/or disputed in the rest of the thread. Please read the entire thread to get a better understanding of what the proposed tax plan may mean for poker players.

Where does it say that the proposed bill with "eliminate the Schedule A deduction for gambling losses"?

This is been thrown around a bunch in the community lately but I have yet to see any evidence that that the change is beyond “expenses incurred in carrying out wagering transactions”. For a recreational filer these expenses are almost nothing (as you cannot deduct business expenses), limited to possibly ATM transactional fees that one may incur at a casino while in the process of gambling.

For professional players filing a schedule C there could be a slight negative impact if you had a loss for the year when subtracting your business expenses from net gambling earnings.

However, this is a far cry from not allowing recreational filers to deduct gambling losses (schedule A) from their gambling winnings, which if actually enforced would ruin the entire legalized gambling industry.

If that were to be the case then you would be taxed on any gross recorded win (W2G for poker tournament, slot W2G etc) regardless of your net result for the year.

Examples:

1. You receive a $100,000 payout for a poker tournament but have $300,000 in tournament entry losses in a year. Your net is $-200,000. You owe tax on $100,000.

2. By the letter of the law, if you play cash games, every winning "session" would be taxed with no regard to further or prior losses that you may incur for the year.

You're saying that's not the case, right Bart? If it is the case, then I'd assume most tournaments with cease to exist within a couple of years since those are the only elements of U.S. poker that have publicly recorded results. Also a major step back for online cash games since those can be recorded/seen as well.

Can we change title to include US / USA somewhere?

The third paragraph of the second article I referenced states:

"Some elements of the bill might disappoint those who rely on popular tax breaks, as it eliminates many popular deductions, including those for medical expenses; personal casualty losses; and tax preparation services (as well as gambling losses). "

That article is taken from an article in the WSJ, but I couldn't read that as it's behind a paywall.

Agreed. I don't see how less professional US poker players would be a bad thing for anybody who plays in the US but doesn't pay taxes there. Tournaments might get smaller, maybe significantly, but that's not too bad if it means a better rec to reg ratio.

That's like seeing the bright side of getting Cat **** in your mouth that's infected with toxoplasmosis.

I mean, it could possibly mean the end of the WSOP franchise, no? I guess I'm talking out of my ass since I don't know their revenue numbers, but if the amount of players playing tournaments gets cut in half then I don't think anybody besides the WSOP C-suiters could know the actual effects this whole thing would cause.

I am just saying it might be good for some people. I was already considering giving back my green card after 2018, which would mean staying a little less than 6 month of the year in the US compared to a little more than 6 month/year right now, and that kind of tax law change would definitely encourage me to do that.

The better rec to ratio isnt going to matter when the tournament you want to play wont exist anymore.

Changes like this arent just bad for US pros its just bad for poker as a whole regardless of where u reside.

Gambling expense deduction - According to the Nevada Independent article, professional players can still deduct expenses up to the amount won. So expenses are still deductible, just not beyond income.

My guess is that the change would prevent you from carrying forward/backward losses from years in which you had less income than expenses.

Gambling loss deduction - This would eliminate the itemized deduction for amateur gamblers. If this was perfectly enforced, this would effectively eliminate gambling in the US as it wouldn't be financially viable for anyone except the wealthiest individuals to play. Whether that's a good policy or not, I think it's safe to say Congress is not currently in favor of eliminating the casino industry altogether and the final form of the bill will not force gamblers to pay taxes only on gross winnings.

RE Gambling Loss Deduction - How many amateurs gamblers are deducting itemized gambling losses now? I am not sure I follow why it would eliminate gambling? If someone gets a big Lotto/Slot/Keno/etc jackpot is the difference going to be them deducting the $100 that they played in order to win?

Perhaps I am missing something but I just dont follow.

Most don't file to the letter of the law (claim all wins, claim all loses) when there is not documentation issued like a W2G. I imagine that the IRS doesnt care much, as most are in fact net losers at the end of the year and its hard to enforce.

However, eliminating the gambling loss deduction would greatly effect any event where documentation of a win must be produced, like say a poker tournament. Because then you have a situation where you are paying taxes on gross earnings even though you could be a large loser overall.

A worst case scenario would be if the IRS thought that they could gain significant extra revenue by the lack of gambling loss deduction and set out guidelines to track what currently is undocumented gambling. Like for example, requiring casinos to track your buy-in to a cash game and cash out for the day.

Again, this is very unlikely to happen is it would effectively end the casino industry and I havent seen any evidence that the bill actually takes away the Gambling Loss Deduction.

From this article: http://www.cnn.com/2017/11/03/politi...act/index.html


6. Limits gambling deductions
Individuals who itemize deductions are allowed to deduct gambling losses up to a point. But some players include other expenses in their deductions.
As the law stands, taxpayers are "allowed to claim other deductions related to gambling that fall into the category of "expenses incurred in carrying out wagering transactions," according to The Nevada Independent, which has been following the gambling provisions of the bills.
The bill narrows what is deductible to only include gambling losses. If you itemize your deductions, you may deduct your gambling losses on your federal return up to the amount of your gambling winnings.

EDIT:

I just read the relevant portion of the actual bill and have deleted my post. The bill does NOT eliminate the Schedule A itemized deduction for gambling losses. You can still deduct losses up to the amount of winnings. The only change this makes is that you can't deduct incidental expenses (e.g. casino ATM charges) in an amount that when added to your gambling loss deduction would exceed gambling winnings.


This isn't nearly as big a deal as eliminating the gambling loss deduction.



SECOND EDIT:

I think it does limit deductions for ordinary business expenses for professionals to an amount that when combined with losses does not exceed winnings. I didn't read enough to be 100% sure on this one, but I think it does do that.

Thanks - I dont think this applies to amateurs entering a poker tournament. e.g. how many amateurs enter the main event thinking if they win $xxx,000+ or whatever that is only good b/c they are going to write off losses from their last cash/tourny sessions.

It's a pro thing imo and I get that. I do not think any or many amateurs care. To the extent they do, just avoid tournaments right? I agree cash game tracking wouldn't be worth the casino's effort and they would want to avoid that and would push back.

This information will easily be misinterpreted by most because the way that the article is laid out. You cannot deduct business expenses for gambling if you are a recreational player.

The expenses that they are referring to--"Expenses incurred in carrying out wagering transactions", are extremely narrow and refers to things like ATM or cash advance fees at the casino, not gambling expense deductions like travel, lodging, mileage, meals or anything else that normally is deducted within a schedule C (business deductions).

^^ This is the important part. And what I was trying to point out @PokerXanadu. The bill isn't eliminating the ability to deduct gambling losses in Schedule A.

It not a "pro" thing. Its an amateur thing. Pros still net their earnings. They dont itemize gambling losses on their return.

It would effectively end any form of gambling where documentation is produced, like a poker tournament. Who in their right mind is going to participate in an event where 40% is withheld from each individual result?

Isn't this describing every day at work for some people? (And generally, other people want them to pay more)

I would guess 99% of people who enter a casino don't properly deduct itemized gambling losses. Since many people aren't going to itemize enough over the standard deduction (even at current levels, let alone the higher levels proposed), this effectively means for many people that they have to pay taxes on their winning sessions but are unable to deduct their losing sessions. If this was actually enforced by the IRS and understood by gamblers, the casino industry would collapse.

Removing the ability to deduct losses would certainly make this worse, especially for the 1% who actually do this to the letter of the law, but in reality most people (amateurs) would continue to not properly report gambling winnings/losses

So the travel, food, etc. is schedule C, and the actual gambling losses are schedule A.

And even in the new bill you can still have schedule A, but you can’t claim more losses than you have in total reported winnings.

And none of this has to do with cash games, just tourneys where tax forms are required?

I don’t see how the sky is falling. Most “pro” tournament players lose more than they win. I don’t see how they need to carry that forward into the next tax year.

Horus is IMO a genius on this issue. We should hold off on opinions until he weighs in.

You are supposed to report cash game winnings on your tax returns both now and under the new bill. Tax withholding and/or tax reporting by the casinos are done only on tournament net winnings over $5K (and possibly jackpot winnings).

One other thing to consider for recreational players: the standard deduction will double under the tax plan, so itemizing gambling losses on a Schedule A will be more limited than now.

This post is poorly written. The proposed bill does not eliminate expense deductions for professional gamblers.

I'm going to trust the ginormous gambling industry to make certain that any proposed new law will not ruin their business.

I'd read the OP and explained to my mother that if that was going to be the law she'd have to stop playing slots bec of the two tax forms she'd gotten for hitting $2K twice on the Wheel of Fortune slot machine. The industry can't allow that to happen.