35 Years of Advantage Play – Part 18 – Q+A

Your questions keep pouring in!

Q: When you said that your winnings had reached $1.6 million, did you mean gross collections without losses having been deducted, or did you mean net profit? The two different figures could be VERY different!

A:  Very different indeed!  And I probably shouldn’t have used the word “winnings.”  I have heard so many people talk about their “lucky” friends who always came back from  Vegas with “big wins.”  In 99.9% cases, those visitors were bragging about their big “jackpots” but never go on to say whether they brought home any of that jackpot money.  It is not so exciting to talk about all the losing sessions.

That figure I gave is NET win, that is – profits.  Whenever I talk about big individual jackpots, I try to always balance that with details about losing sessions.  Big jackpots are thrilling to experience, but all advantage players know that long-term successful gambling is a grind.  Video poker players know that they will suffer many losing sessions between those exciting jackpots.

Related to this question is one that asks whether we counted the value of comps in our cumulative profit number.

For the first years of our casino vacations, we would count comps in our calculations as a way to stretch our entertainment budget.  However, as we were spending more time in Vegas and in other casino venues and were also playing video poker at higher denominations, we were earning more comps than we could have afforded with our regular modest financial situation.   So that was the time we stopped adding the value of comps.  We would choose plays that had an EV (theoretical expected value) of over 100% on the play itself.  Any comps would be “gravy.”

Other related questions on this topic of gambling profit had to do with what we counted in our “Win” column.  Obviously, that included cash that came directly from winning on a casino game.  But there were other profit sources:  A big one was cash – or more frequently freeplay – that came from players club benefits and the casino marketing department.  Especially in the later years, when good games were being removed and paytables were being downgraded, these cash/free play offers were the only thing that could put the mostly negative games into positive territory.  Plus, promotions were always a major profit source, like multiple-point days, tournaments, and drawings. Couponing, especially in the early days, was almost always a good way to add some plus numbers in the “Win” column.

Some items that might have seemed to be in the comp category – and not counted as “winnings” – I sometimes did add as gambling profits.  We earned a lot of gift cards in various casino promotions over the years.  If we used them for purchases that we would make anyway – for example in stores that sold groceries, gas, electronics, clothing – I viewed them as cash-equivalents and therefore gambling profits.  Sometimes I would end up with cards we just couldn’t use – in the last years we were not in the accumulating-stuff stage – but we had children and grandchildren that never saw a gift card they couldn’t take off our hands!

So, checking our detailed records I kept the last 23 years of casino advantage play –   a winding path with lots of twists and turns, a few glorious mountaintop points, and many slogs through valleys – I see that we averaged a profit of about 62k a year, even though we never put in regular  40-hour weeks.  Although we treated our casino play as a business so we could enjoy a profit, it was definitely a part-time retirement endeavor.

This brings up another question:  What about IRS issues???

Once we began playing at higher levels, we started filing as a business, establishing a S Corp which included both gambling income and my gaming writing.  After a few years we disbanded the S Corp – too many state and accountant fees – and went to the simpler Schedule C.

Yes, I had to “fight” the IRS in several years, but I pretended they were like the slow learners I had in my early teaching career.  So, I would write/talk patiently – in simple terms – how gambling could be a legitimate business.  I was always able to convince them – albeit with a lot of time-consuming paperwork and long phone calls – before it was ever needed to go to tax court.

I can’t answer most tax questions that gamblers send me because the subject is so complex and depends entirely on individual circumstances.  I would refer you to the most detailed and up-to-date resource you can find on the market today, the book Tax Help for Gamblers. I brought on board Russell Fox for this last edition (the fourth – in paperback and online ) to add his expertise in explaining all the new developments, particularly in the exploding area of sports betting and the major changes in new tax legislation.

Early on in our casino adventure our goal was just to break even and enjoy the comps.   We actually surprised ourselves by making money on such a fun activity.   I guess you might say we overshot our goal.