New Tax Ruling for Professional Gamblers

The  Las Vegas Review-Journal recently published an article about a new tax ruling for professional gamblers. It is always big news when the IRS decides something in the FAVOR of gamblers!

As discussed at length in Tax Help for Gamblers, trying to convince the IRS that you are truly a “professional” gambler is not an easy task.  And even if you finally do so, you find you are not entitled to all of the Schedule C advantages of taxpayers involved in businesses other than gambling.  You can’t count any more losses than you have winnings.  You can’t offset losses against other income or carry forward losses. 

The professional gambler has always been able to deduct work-related expenses.  (The R-J article seemed to imply that this had not been allowed in the past.)  However, you had to add your expenses to your losses –  and this total could not be more than your winnings total.  This new tax ruling gives the professional the ability to “go below zero” with respect to operating expenses.

I asked my tax book co-author, Marissa Chien, for some input about the new ruling:  In my opinion, it’s not as big of a boon as various articles are making it out to be.  You need to be an already established professional gambler for you to be able to take these expense deductions if you have a bad year.  I think you’re going to have a tough time showing a net loss if it was your first year as a professional gambler because it would be harder to meet the definition of a professional gambler!

However, one bright spot here –  if this new ruling is applicable to any of your circumstances for the last three years, you can go back and  amend those returns.