It’s getting near that time when we start thinking about our tax returns. And many casino goers are wondering about how they need to deal with their gambling information, particularly if they received one (or more) W-2G’s for the first time last year. Many of these first-timers might be tempted to ignore them, thinking that even if they had one or two jackpots they were an overall loser for the year so didn’t need to give the IRS any information.
WRONG! And you need to know why.
Now there is a YouTube video that explains some of the basic information you need about taxes and gambling, with Steve Bourie, publisher of the American Casino Guide, asking me many of the questions gamblers might have about this subject. If you have more questions and need more details, you can find them in Tax Help for Gamblers. This book can be ordered at queenofcomps.com and at http://www.shoplva.com/. At the later place you can also order it as an e-Book to download immediately. Many people have found it valuable to share this book with their accountants and tax-preparers who aren’t familiar with many of the complex tax considerations for gamblers.
I did send our NV. Senators and Congressman an email concerning the jackpots on retirees making them a part of Obama’s wealthy with income over $200,000. Therefore, I found it interesting that not only were the tax increases compromised at $400,000, but it specifically states TAXABLE INCOME.
Hope my emails contributed to that outcome.
With the fiscal cliff compromise, there’s another change that will impact some gamblers. Once your Adjusted Gross Income reaches $250,000 (not that high for a VP player with other income), there is an escalating percentage of deductions taken away. I don’t believe this has been reported in Las Vegas, and it’s a big deal for those not filing as a professional gambler.
Are tips considered a deductible expense?
Sorry, QZ, but that has NOT happened yet. There has been a memo in one case that a gambler could deduct EXPENSES in excess of gambling wins, but that was just the opinion of one researcher at the IRS and may not be used or cited as precedent. My prediction when gambling will be treated like any other business – when hell freezes over!
I’ve found that if you file as a professional gambler and have halfway decent records, the IRS wolves only nibble on you a little. Moreover, you can deduct the various expenses associated with generating your gambling income. Conversely, if you don’t report your gambling activities on a Schedule C, you get treated very unfairly–they take the (ludicrous) default position that your W2-Gs represent 100% income/profit, as if all you did to generate those jackpots was walk up to a VP machine and play one hand, and hit a royal every time. Absurd. But that’s the way they play it. Probably the single best piece of advice I would give anyone when filing their taxes is “Expect them to try to cheat you.”
Defend yourself by using slot club win/loss statements to prove what your ACTUAL gambling income was, and laugh off the W-2Gs as the meaningless pieces of paper they really are. I was once told candidly by a Nevada IRS agent, “We know those W-2G’s don’t mean anything.” They just use them as an intimidation/revenue enhancement tactic. The law says that you only owe tax on INCOME. If you lose money gambling, that isn’t income. Though the IRS acts as though it’s above the law…it’s not. Most of the time.
I just saw your video, I saw something that I believe is no longer true. (but double check this). I believe that a fairly recent ruling has allowed professional gamblers to claim losses that are greater than wins, just like any business in the red. But of course, such claims will be less likely to be taken as valid professional gambling, especially if you have other income. I am hoping I never need to find out on this one.