Quote:
Originally Posted by DC2LV
Actually, it could be an issue for U.S. federal taxes as well for some people. Beginning this year, a married recreational poker player won't be able to offset any winning "sessions" with losses until he has accumulated over $24,000 in itemized deductions. And if he doesn't own a house with a mortgage in a high property tax state, that pretty much means he's ****ed.
Another change is that the itemized deduction for the state and local income taxes and property taxes, in the aggregate, is now limited to $10,000. So the high property tax states are not going to be able to deduct all of their property taxes. I would guess that a lot of people, myself included, paid at least some of their 2018 property taxes in 2017 so that they could deduct it on their 2017 tax return before running into the $10,000 limitation in 2018. In order to be deductible in 2017, the 2018 property taxes had to be assessed by the locality before the end of 2017, so most people probably wouldn't have been able to pay and deduct all of the 2018 property tax in 2017. So, anyway, people in high tax states aren't going to have deductions in excess of $24,000 too much faster than people in lower tax states due to the $10,000 limitation on those types of deductions.
But the issue you raise isn't nearly as big a deal as the issue being discussed earlier in this thread. If your itemized deductions are more than the standard deduction because of gambling losses, but otherwise you would have taken the standard deduction, then the result is you effectively lose the $24,000 standard deduction (or a portion of it). Or if you take the standard deduction, then you can't deduct gambling losses; in this case your gambling loss deduction must be less than $24,000 or otherwise you would itemize. Therefore, the most you can lose out on is a $24,000 deduction.
$24,000 * 37% (max marginal tax rate) = $8,880. So at most, in the worst case scenario (which is not too likely), this costs you you $8,880 in extra taxes that you wouldn't have to pay if you would itemize deductions even in the absence of any gambling activity or if, get this, you could just report net gambling winnings as income rather having to report gross winnings as income and having the option to deduct losses if you choose to itemize your deductions.
The result in the above paragraph is only if you are at the highest marginal rate and have no other itemized deductions besides gambling losses. (Or works out basically that way if you have $23,999 of deductible gambling losses.) Seems unlikely you would be in the highest marginal bracket and have no other itemized deductions, but possible.
If you have at least $10,000 of state income taxes and property taxes that you can use as itemized deductions also, then you're losing out on $14,000 of deductions, so $14,000 * 37% = $5,180 at worst
If you have at least $10,000 of state income taxes and property taxes and $10,000 of deductible mortgage interest, then you're losing out on $4,000 of deductions, so $4,000 * 37% = $1,480 at worst.
If you have $24,000 or more of itemized deductions other than gambling losses, then it doesn't matter. (With respect to this issue anyway; the artificially inflated AGI due to this reporting system can phase out certain deductions and other tax benefits for you if it gets too high.)
The new $10,000 limit on deductions for state and local income tax and property tax, in the aggregate, was a real kick for certain states (NY, NJ, CA, etc.)
I heard some states or localities have been working on (or in some cases may have even had proposed) bills that would allow taxpayers to make charitable donations to a state/local fund instead of paying the state/local taxes. Charitable donations are still fully deductible on the federal tax return without the $10,000 limit. People may have other ideas for workarounds also. I haven't been following what state governments or agencies have been working on or considering for this.
EDIT:
BTW, the 37% bracket is for income over $500,000 ($600,000 for married couples filing jointly), so most people will have a lower marginal rate.
Last edited by Lego05; 03-29-2018 at 12:55 AM.