Gamblers Ask About New Tax Law

An explanation from the American Gaming Association (AGA) from a press release I was e-mailed  – with my comments in [ ]:

What Does Federal Tax Reform Mean for Casino Customers?

Background

Congress recently enacted extensive changes to our nation’s tax law. Among the changes contained in the final bill were a reduction or elimination of many deductions for both individuals and businesses. This document is intended to address questions about how changes to the law will impact casino customers.

Rules for Deducting Gambling Losses

• Under the new law, those who itemize deductions will continue to be able to deduct gambling losses up to the amount of their total winnings. For example, a slot player who wins $25,000 in jackpots may deduct up to that amount in verifiable gaming losses when they fill out an itemized tax form. After making this calculation on the form, the player will only be responsible for paying taxes on any net income they have received from gambling. If losses are greater than winnings, the customer would have no tax liability for their gaming income. [This deduction was “saved” at the last minute.]
• The new law will impact those who meet the IRS’s narrow definition of a “professional gambler” by capping their deductions for both wagering losses and expenses to the amount of their winnings. As an example, a professional gambler who has $50,000 in winnings can deduct up to that amount in combined losses and expenses such as travel, meals and hotel stays. Prior to these recent changes, professional gamblers were allowed to separately deduct expenses incurred in carrying out wagering transactions without regard to their wagering wins and losses. This limitation will expire after 2025 unless Congress chooses to extend it.

Other Changes to Consider

•  Another consequential change made in this bill was to significantly increase the standard deduction taxpayers may claim (now $12,000 for individual filers, $18,000 for heads of household and $24,000 for joint filers). As a result of this change, estimates indicate 90% of tax filers will no longer choose to itemize deductions under the new regime. For those among the two-thirds of taxpayers who already chose to take the standard deduction, this increase in the standard deduction is likely beneficial and shouldn’t impact current treatment of wagering wins and losses. Casino patrons who itemized previously, however, should consult a tax professional to determine whether they will continue to achieve the greatest tax benefit from itemizing under the new law.

Legal Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their specific situations.  [Very important suggestion – don’t depend on personal opinions you read on Internet gambling forums!!]

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In another release, the AGA talks about future concerns that need to be addressed:

While there were wins, there are other areas where we will need to continue to engage to protect and promote the industry as “fixes” are considered in 2018 and beyond. High priority targets include:

1.  Lifting the Slot Tax Reporting Threshold: The $1,200 slot tax reporting threshold was set in the 1970s. The tax reform debate provided us an opportunity to introduce this topic to legislators and pave the way for adjusting the threshold in a favorable way for our members and customers. I encourage your continued engagement to help us make a compelling case for how a higher reporting threshold will help lower administrative costs and provide our customers an improved experience when they visit your facilities;

2.  Promulgating Regulations that Work for the Industry: Legislation of this size and scope will undoubtedly require significant details to be determined by the IRS and the Treasury Department. AGA will remain vigilant to ensure any rulemaking by executive agencies is consistent with industry practices and priorities; and

3.  Assessing and Addressing the Impact of Certain Changes: It may take some time to fully understand the effect some changes have on the industry and our customer base. For example, doubling the standard deduction for individuals will likely result in fewer taxpayers electing to itemize and net their gambling income/losses. AGA will need your continued input to know whether this has a measurable effect on customer behavior, and we stand ready to work with Congressional champions to help address any unintended consequences that threaten the health of the industry.  [Maybe lead to being able to use NET win/loss figures and use “session” records that can show lower numbers than W2-G jackpot figures???  I plan to live a long time but I would be surprised to see this in my lifetime! 🙂 ]