Tax Tips

Are There Tax Deductions For Professional Gamblers?

>When we think of professional gamblers, we typically think of the people at the final table on World Series of Poker. But what we may not realize is that those people are a lot like you and me, or at least they started out that way. Lots of people enjoy playing games of chance from time to time. Some people enjoy it so much, and/or are good enough at it, that they decide to try making a living at it. And whether you make it to any final tables or not, professional gambling can be a viable career—as long as you treat it like one. That includes taking things like profit and loss very seriously. It also includes some potential tax deductions.

Professional gamblers must report their gambling income and losses on a Schedule C form with their tax return, just like any other small business owner. If their gambling business nets them a loss, they can carry through that loss to their other income on their regular 1040 tax return. They can also deduct expenses related to their gambling business, including travel and lodging costs, computer-related expenses, tournament entry fees/table fees, etc. In other words, they can treat gambling wins or losses just like business gains or losses.

The catch is that in order to do that, they need to be able to prove that they are in fact gambling professionally, not just casually. This means more than just saying “I’m a professional gambler,” it means taking actions that can show you are seeking a profit rather than entertainment. For instance:

  • Keeping careful records of wins, losses and expenses
  • Studying the craft, history and tactics of your wagers of choice
  • Consulting with experts to improve your gambling ability
  • Putting in extensive time and effort, not just doing it every now and then
  • Winning more than you lose over time, either in number of wagers or amounts of money (or both)
  • Having little or no other income
  • Keeping gambling separate from other recreation (doing it without friends or family, not doing other vacation-like activities concurrently, etc.)

You don’t have to do all of those, but if you’re facing tax relief issues and a court needs you to prove that gambling is more than just casual entertainment for you, pointing to activities like these will strengthen your argument greatly. And even if that’s not the case, treating gambling like a business will allow you to make the tax deductions mentioned above without concern about whether you should.

One final note: casual gamblers can deduct gambling losses as well, but not the same way as professionals. If you gamble for fun, you can itemize deductions and include gambling losses, but only up to the amount that you also won. That is, if you won $50,000 and lost $55,000, you could only deduct $50,000 of your losses. And you couldn’t deduct any travel or other related costs as business expenses. So if you aren’t treating gambling like a business, be careful. Trying to maximize tax deductions in that case could get you in some trouble.

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.