By: Kevin Lewis

Kevin Lewis — Wed, 21 Jan 2015 19:36:30 +0000

Someone brought up an interesting point on VpFree: if a royal generates tax liability (which even a nickel royal does, even though most quarter and below hits do not generate a W2-G and can thus be concealed from Big Tax Brother), then the true payoff for a royal should be considered as (gross win)-(eventual state and federal tax liability). For instance, if you’re in the 28 percent federal tax bracket, a $4,000 royal is really only worth $2,880 to you. Now, a royal constitutes 2 to 2.5% of the total return, depending on the particular game played. Losing 28% of that would mean hacking 0.6 to 0.7% off your return–which will shove just about any positive .50 or $1 game deep into negative EV territory, considering how slim the edge is on the rare games that are positive. And naturally, if you play recreationally with a small disadvantage, the tax liability arising from W2-Gs can more than double your nominal -EV.
The only defense is to keep accurate records and file a 1040A, reporting NET wins/losses for the year. But as we know, the IRS often gets really fiddly about that. Moreover, even if there are no resultant issues, the fact remains that royals being worth less than their face value means that it’s probably foolish and unprofitable to play above .25 denominations unless you keep VERY good records AND are already substantially in the red (so that wins, rather than being income, offset previous losses).
I stopped playing dollars about ten years ago when I booked a loss for the year of roughly $6,000 but the IRS insisted that I must have actually WON eleventy skillion dollars and insisted I report to the local IRS office to have my internal organs harvested as compensation. Of course, as we all know, when we hit a $4,000 royal, we haven’t lost a single dollar up to that point, so we have $4,000 net income!!!

By: Robert & Karen Massa

Robert & Karen Massa — Wed, 21 Jan 2015 19:06:31 +0000

Thanks so much for the book Jean! My wife and I have been big fans of yours for years. We always look for you when visiting Vegas. We saw you and Brad 4 or 5 years ago a The Palms but didn’t want to bother you.
Anyway, this is the only book of yours that we have not read or purchased, as we have just been recreational (yet frugal) gamblers. However, this year we have had more expendable income. Also, one of our local Native American casinos upgraded their VP inventory to actually have some playable machines. Because of that we had our first, second, third and even forth hand pay jackpots (W-2Gs) this year. I’m sure we’ll learn more great tips just as we always have from your books.
Thanks again!
Robert & Karen Massa
Girard, KS

Comments on: BOOK and TAX TALK

By: Kevin Lewis

By: Robert & Karen Massa