These details are from 2010 taxes and I bit the bullet on what I thought may be avoidable, but the situation will be similar this year so I thought I'd ask:

I am married and filing as a recreational poker player (because I have other full-time employment). My net poker income was ~$230k with $200k losses. The $200k, of course, gets listed as an itemized deduction for me and I forego the standard deduction.

However, I discovered that, even when filing separately, my wife is not able to take the standard deduction costing us a few thousand dollars. Is this avoidable? I thought the premise behind filing separately was that you would be able to file as if you were never married.

Being able to file separately is not like being able to file as if you were not married. The deductions, etc allowed for 2 single people are not the same as for a married couple filing individually. For the most part it ends up working out the same.

You can't do anything about it.

I was in the same situation for 2010 taxes and am for 2011 taxes.


I would take the standard deduction, but I need to itemize to get rid of gambling losses. I was doing this before I was married and my current wife was taking the standard deduction. Now we itemize because I need to deduct the gambling losses ... she loses the standard deduction she was taking. (Hopefully by 2012 tax time we'll have bought a house and have mortgage interest to deduct anyway. I'm assuming you and your wife don't currently have a mortgage ....)

My wife and I pay more taxes as a married couple than the sum of our taxes would be as single individuals precisely because of this issue. Looks like you and your wife do too.


And if you think about you'll realize that it makes sense to not let you file separate and have 1 itemize and the other take the standard deduction. Otherwise every married couple, where both individuals have some income, would file separately and have one spouse use all the itemized deductions and have the other use the standard deduction.

The thing that doesn't make sense is not just allowing you to net gambling wins and losses and report that as income instead of reporting gross wins and having the option to deduct gross losses.

Just be glad you're not in a state that doesn't allow deductions of gambling losses. In those states it's nearly impossible to gamble and pay taxes correctly, you end up paying more in taxes than you "win."

Thanks for replies.

Fortunately, we bought a house June 2011 so we'll have a lot of interest to deduct this year. Also, my wife works from a home office so we should be able to deduct a % of utilities and maybe a few other things.

I guess the smart thing to do would have been to wait until 2011 to legally get married since we got no other benefits from marrying (e.g. healthcare, etc.). Oh well...

Yeah, this is insane. I can't imagine any recreational players actually file correctly.

how do you look up what states are the bad states for gambling? Also is there an article on how to file for taxes to net out wins and losses and what if you just put in how much you won for gambling and still did your standard deduction...

I had never heard of this particular issue. Pretty brutal, though I guess the logic makes sense.

edit: You know what, no, the logic doesn't make sense. Gambling losses are completely non-transferrable between members of a couple and there should be an exception here. Poker players have enough damn trouble tricking people into marrying them without charging a $2,000/yr price tag for the privilege. The forum Tax FAQ sticky is a good starting point.

Bump to prevent archiving, as this thread is being added to the tax sticky.

Can anyone comment on what exactly happens with non professional players and not being able to deduct losses? Does anyone actually pay taxes on 200k when their end profit was something much less as in OP's case?

It's almost a joke with how the rules are written, and I'm sure next to no one files correctly for any significant amount of play time. Seems that just about everyone in a casino at any given time is technically committing tax fraud by having a win at one table and losing it on another.

Non-professional players DO get to deduct losses, it's just after they count all their wins. You don't actually pay on the $230k in this situation (with a possible exception of state income tax in a few states). You report the $230k as income and the $200k as a deduction, and you effectively just owe tax on the $30k.

The issue here is that taking the $200k deduction causes taxpayers who would otherwise take the $5.8k standard deduction to lose that deduction, and their husband/wife as well. This has its own set of problems, such that a player who has $10k in winning sessions and $9k in losing sessions (net winner of $1k) will likely end up owing more than $1k in extra tax from his poker playing, but it's not as bad as owing tax directly on the inflated amount.

I thought I had read a million times that losses were not deductible for non pros. How did I misinterpret this?

Even though you file separately, if you itemize she can't take the standard deduction. The only way to avoid this is to get a divorce. Then she can take the standard deduction...and half your stuff

Non-pros have to report their gross winnings first, and then they get to deduct their losses, whereas pros get to simply report their net (i.e. they "deduct" their losses from their wins beforehand, instead of having to report them separately). That's probably the source of your confusion.

Also, for non-pros and pros alike, losses are only deductible to the extent of one's winnings for the year.

you could file jointly ...

although it sounds from your explanation of the issue like you're aware of the situation and filing separately is better. For most situations it is better to file jointly if you can.

The last 2 years we have filed separately here are some of the reasons why you would file separately despite being able to file jointly:

* 2 relatively high incomes such that the expanded tax brackets for joint filers end up being the same as filing separately, i.e., both separate returns are in the same marginal bracket (filing separate might not really benefit, but may be the same)
* one filer has significant deductions subject to a floor, e.g., medical expenses that are not deductible until after 7.5% of income. If the combined income was 200K the first 15K is not deductible, but if the split was 150K and 50K the 50K could deduct medical expenses over 3.75K (gaining 11.25K deduction)
* phased out credits where one income could qualify, e.g. the child tax credit which starts to phase out at 110K (55K married filing separate) so if one income is closer to 55K than the combined income is over 110K then it's additional credit of $50 per 1000 income.

They can deduct them but the total wins still goes against your adjusted gross income bumping people into the highest tax bracket or into AMT. Then you deduct losses on schedule C.

A pro can net wins and losses.

zero (not a tax professional)

^1040 Schedule A for itemized deductions

The artificially inflated adjusted gross income does NOT cause people to be bumped into higher tax brackets.

I don't really know much about AMT.

Also, as mentioned right above this post, the non-pro uses Schedule A to deduct losses.