Would post in the existing sticky thread, but it's locked.

Anyone think there's possible changes on the horizon affecting US professionals? (i.e. territorial system mention for expat grinders or potential for business income rates via pass-throughs, etc.)

I imagine it will have a much bigger effect on amateurs. Professionals should be able to continue to deduct tournament fees and cash buy-ins as business expenses. It seems like those deductions will go away for non-professionals unless gambling somehow becomes a separate category like capital gains.

If the 15% tax rate for pass-through entities (Partnerships, Corps, S-Corps, LLCs, etc.) is enacted into law, that could have a huge effect on professionals who structure themselves/business in such a way.

*If* *could*

Yes, obviously if a business's taxes are significantly lowered, that would have a big effect. However, for amateurs, it is the deductions side of the equation that makes a big difference.

Looks like sole proprietorships may be capped at a 25% top rate.

No specific mention of going to the territorial tax system yet (vs. worldwide income) - it's been in some articles leading up to this latest outline, but we'll see. And even if implemented, a territorial system *may* only apply to corporations, not individuals/sole proprietors.

[I.e. for US grinders abroad, that *could* give opportunities to live/grind in a tax-free location, and only pay self-employment (SSN/MC) tax. In best-case.]

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.

Eliminating the Schedule A itemized deduction for gambling losses isn't bad, it's catastrophic. It's essentially every losing recreational player facing an arbitrarily large tax bill on top of their loss for the year and every non-professional player being forced out of the game entirely.

I see the mention in the article you linked but I'm having trouble finding this in the full bill text, PX, do you have a source? Mostly just hoping that the article conveyed this incorrectly, maybe conflating it with the other effect you noted "Limitation on Wagering Losses".

And obviously +1 to your proposed solution...

Looks like you have cross posted this thread to NVG.

Like @repulse said here,

and I said over there https://forumserver.twoplustwo.com/s...25&postcount=2,

I dont see any mention of anything elimination the Schedule A gambling loss deduction for non professionals. If that were to be the case, and enforced, legalized gambling would end as we know it. I would hope that the casino lobbys would have a thing or two to say if that were to happen.

The new bill does NOT eliminate the Schedule A itemized deduction for gambling losses. (The elimination of that would be catastrophic.)



If the new bill passes as written:

1. 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.


2. With respect to professionals, 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 of the bill and think about it enough to be 100% sure on this one, but I think it does do that.

Thanks for the clarifications. I wasn't able to find the bill text itself when I posted earlier. Hopefully these will be the only changes in the final versions (unless they want to adopt my amendment, of course!).

I heard it was going to make poker great again.

Any update on this. Mainly concerned about filing as a professional in 2018.

Example: Net poker earnings of $10k, poker related business expenses of $30k. Obviously not a great situation, but that's not the point.

Currently, schedule C shows a net loss of $20k which carries over to 1040 and goes against my other passive income. Assume $40 k of passive income so AGI is $20k.

Does the passed bill make my schedule C income 0?? i.e only deduct $10k of my business expenses. i.e my AGI increases from $20k to $40k.

Per this article...

http://gantdaily.com/2017/11/03/all-...l-in-one-post/

There used to be a small subset of non loss-related expenses which were deductible under the old law. These are no longer deductible. I believe this only applies to people who aren’t registered as professional gamblers.

I'm pretty sure professional gamblers can no longer take expense deductions for gambling expenses beyond the $0 income mark on their Schedule C, beginning in the 2018 tax year, ending after the 2025 tax year.

See this article:

What’s in the Tax Bill, and How It Will Affect You

Also this article, which was published before the final version of the tax bill was passed:

http://www.taxabletalk.com/2017/11/0...-losing-years/

And here is confirmation from the House Conference Report of Dec. 16, 2017:

So for the next eight years, you can't deduct or carry over gambling business expenses that exceed your net gambling income for the year.

I wonder if this will drive true professional gamblers to start forming business entities (If they already haven't).

That doesn't solve the expense deduction issue:

http://www.taxabletalk.com/2014/02/0...siness-entity/

very surprised the republicans have again betrayed the poker community. VERY surprised.

We weren't talking about gambling losses (at least I wasn't). We were talking about expenses which can no longer be deducted apart from losses/gains. I would think if one is engaged in the business of gambling and one is incorporated as such, then the expenses associated with the business (travel, etc.) would be treated like any other business related expense according to the taxing scheme applicable to the specific type of business entity.

I too was talking about business expenses apart from losses. The new tax plan makes it clear that from 2018 thru 2025, such expenses are only deductible against gambling wins, whether you are filing as a recreational player on Form 1040 or as a professional gambler on a Schedule C, or even as a pass-through business like an LLC. The one post of mine you quoted was just to show that forming such a business entity doesn't change the nature of such business expenses
they will still be treated with the same limits as gambling losses. See my post above on the new tax bill for the relevant quotes and linked references.

I'm not really trying to be argumentative, but I think it would be good if this issue were cleared up and none of the info you provided is really clear (not your fault... the IRS and Congress are usually bad at clarity... this is why we have courts.)

You are claiming, and I am inclined to agree, that people who claim business expenses as part of a Schedule C filing, will no longer be able to do so above any gambling profits. In other words, they will never be able to claim an overall gambling loss, when including their business expenses. Ok, that makes sense, and may be unfortunate for those who managed to attain the professional gambler status in the past (not necessarily easy, unless one doesn't care about an IRS audit). So I can see how this law may effect many people who consider themselves professional gamblers (and even whom the IRS has allowed to be designated as such), but are not incorporated.

However, when I said this might lead many to incorporate, I meant that there may now be some significant tangible benefits to doing so. It would be a separate legal entity whose sole purpose to exist is to engage in gabling activity. With these sorts of entitles, you don't just file a Schedule C. You actually file a completely separate tax return for the entity and then your personal return is affected depending on the type of entity and what compensation you derive from it. In that scenario, the legal entity ought to be able to deduct the business expenses. I can't imagine any way the IRS or Congress would prohibit that and it certainly isn't clear that this bill does so.

I could be wrong, though. I have lots of expertise in business entities, but not so much in gambling tax law. But I don't think any of the info you have provided clarifies this point though. And I remain skeptical that this bill would basically outlaw the formation of gambling entities. I mean, deducting business-related expenses is basically one of the two main reasons for forming a business entity in the first place (liability protection being the other).

I believe you are wrong. The crux of the matter is the interpretation of Section 165(d) of the Tax Code:

For 2017 and before, "Losses" for this paragraph of the tax code was interpreted (by the IRS) to mean gambling losses as well as related gambling expenses (e.g., the cost of an atm withdrawal for making a wager) for the recreational gambler (those not reporting taxable income as a pro player). For the pro player, "Losses" did not include ordinary business expenses and any such expenses beyond gambling wins could be carried over as a business loss.

The Trump Tax Plan has clarified this section to the code. For tax years 2018 thru 2025, "Losses" for the pro player now include normal business expenses that are incurred as part of the business of making wagers. So, for a pro gambler, you now add together your gambling losses and your gambling business expenses to figure your total "Losses" from gambling. If this figure exceeds your gambling wins, you can't carry over the extra amount as a business loss. This will apply to the sole proprietor as well as business entities such as an LLC, Partnership etc.

For example, if you form an LLC as a gambling business and your wins for the year total $100K, your losses for the year total $75K and your business expenses for the year (airfare, hotels, car rentals, etc.) total $40K, your net business income is $0 and your net business expense loss carryover is $0 (until this tax plan provisions expires in 2025).

In essence, the term "losses" for gambling has be redefined to include any related business expenses. Such expenses can not be deducted as normal business expenses for any type of business entity for the years 2018 to 2025. They only get counted as part of your gambling losses.

Anyone have a scoop on this "Qualified Business Income" deduction for pass-throughs?

Sounds like there will be significant tax reduction for many, but there's a ton of gobbly-goop to wade through. What trip-ups (if any) would there be for a professional gambler here?

https://www.greenbushfinancial.com/p...siness-owners/

I agree with everything you say except it is all based on filing gambling winnings/losses (or other deductions) on an individual person's Schedule C and 1040. If a person is a shareholder of an S-Corp, they do not report business income/loss on a schedule C. The business entity itself files a return and any net income is reported as pass-through income on the individual's return in a schedule K. So, the gambling business, would deduct the gambling-related expenses. Nothing in the info I have seen about the IRS clarification seems to indicate that a business would no longer be able to deduct these expenses in their returns. So, I think the distinction may just come down to... does your legal entity file a separate return? If the answer is yes, I think the business deductions will remain. If the answer is no (ie if your business activity is captured in your individual Schedule C/1040), then it appears the deduction will be limited until this provision expires.

This is sort of the crux of the matter of what PokerXanadu and I have been going back and forth on. It is my feeling that the business deduction limitation (not elimination... just limitation) which will be imposed on Schedule C/1040 filings does not apply to S-Corps, since S-Corp activity is not reported on schedule C/1040. This is not entirely clear based on info in this thread, so you may want to seek the advice of a tax expert.

Now, as to your general question, I'm not sure there are any trip-ups for a gambling S-Corp as opposed to any other similar S-Corp. I can tell you what I have learned in my research as an S-Corp (not gambling) owner myself. Again, this is just what I believe to be true, so take it with a grain of salt and do your own due diligence. I will be meeting with my tax preparer this month and if I learn anything new, I'll post it here.

The main purpose of the tax reform was to lower US business taxes to make it more appealing for companies to do business in the US, as opposed to elsewhere. So, corporate income tax rates were cut to 21% from their existing 35%. However, many if not most US business are actually organized as S-Corps or other pass-through entitles, which do not pay corporate income taxes. Instead the owners of these entities pay income taxes on the business profits according to their individual income tax rates, which are usually 28-39%, depending on the overall income level of the individuals.

So, Congress had a problem in that some corporations were getting a big tax cut, but many were not, which would defeat the purpose of the reform. So, they decided to help pass-through entities, by giving their owners a big tax deduction (20%) on their share of the businesses income. This is indeed a big tax break for the owners of companies because this deduction comes right off the top of their individual share of the qualified business income. The part that gets kind of hairy is that Congress realized that many individuals (doctors, lawyers, athletes, and yes... poker players) form S-Corps or other pass through entitles and these weren't exactly the sorts of companies that they were concerned about "stimulating", since these companies do not employ a lot of people. So they put provisions into the law which would limit or cap the deduction these individuals could take if they were essentially "service-based" companies. These limitations are on companies that don't make stuff, but rather rely on the talents of a few, and often times only one person.

The limits depend on whether you file individually, or jointly with a spouse. If individually, it basically means, you can take the 20% deduction on qualified business income up to $157,700. The limit is $315,000 when filing jointly. If your qualified business income is above the threshold, there is a formula which determines what you can deduct based on your w-2 salary. Its more complicated than I would be comfortable getting into, but the bottom line is , if your qualified business income is above the limit, your deduction will be less than 20%, and there is a new threshold limit above which you will not be able to deduct anything.

The following link has more detailed info about how the tax bill effects pass-though entities and has some examples on calculating the deduction which may be available to you. And, of course, you'll want to talk to a tax expert as well.

https://www.forbes.com/sites/kellyph.../#6fe5e9086de3

Then I guess you didn't read the article I linked, which explains exactly why forming a gambling business (S Corp, etc.) doesn't change the nature of the Section 165(d) Wagering Loss deduction to a normal business expense, regardless of who is filing the return (you or the business). And the Trump Tax Plan re-categorizes all expenses for a wagering business (planes, hotels, etc.) to be applied as part of Section 165(d) wagering losses, not business expenses. So no, you are not correct on this issue, imo.

Here is the link once again:
http://www.taxabletalk.com/2014/02/0...siness-entity/

I looked over the link... It is one guy's (perhaps educated) opinion. The link itself reference the fact that his opinion was challenged by others.

Anyhow, even if one agrees completely with him (and I am not disinclined to do so), the link talks about reporting gambling gains/losses as ordinary income and whether this would be allowed, even under a pass-through entity. His conclusion is no, and I agree with him. But again, we are not talking about gains/losses. We are talking about business expenses. For the purposes of a K-1 filing, an individual partner doesn't have to know anything about the business expenses of the entity since they are only concerned with the ordinary business income (after expenses) passed through the entity.

I agree that the new code attempt to "clarify" (this is laughable) what is considered a wagering-related expense. It even references the fact that this new interpretation reverses a Tax Court decision (Mayo) which held that non wagering expenses could be treated as business expenses. This in itself seems like a point with which someone could easily contest this provision in the tax bill.

Anyhow, there's no point in really going back and forth much more on this. Like I said, I'll ask my tax preparer and see what she thinks about this provision and whether it would basically end the concept of gambling-related businesses for individuals. I mean, if one is a professional poker player, and is incorporated as such in the business of playing poker, and one has expenses for training, travel, etc. which are necessary to conduct one's business, then I don't see how congress could suddenly say... no you can't deduct these as normal business expenses. It just doesn't seem like something which would survive judicial review.