Thursday, July 21, 2011

Professional or recreational gambler for tax purposes?

Interesting and informative post from "Taxdood" on a recent case from the U.S. Tax Court:


Anonymous said...

Grump, would you please comment on how YOU file? I'm a local pro who files as a non-pro since my tax preparer said that would be best for me. But, it's confusing as all hell!

I'm worried I'll get audited someday.


Rakewell said...

I can't imagine how filing as a recreational player would be advantageous. There are two good books on taxes for gamblers: Margaret Johnston's "How to Turn Your Poker Playing Into a Business" (title does not match contents), and Scott & Chien "Tax Help for Gamblers." Both say that most accountants don't understand the specialized rules for gamblers, which may explain your tax preparer's odd advice.

Anonymous said...

Thanks, well I presume it has to do with the 15% self employment tax you need to pay when you are a pro.
So assuming you make $40K/yr, that's $6K vs. itemizing and benefiting more than $6K with write-offs.

What's MORE confusing is I've listened to Russel Fox (Poker author and CPA - state "You almost NEVER have a choice with which way you can file".

In case your interested, here's Russ talking about it:


taxdood said...


You are correct to state that a taxpayer almost never has a choice between filing as a professional or recreational gambler. The full-time college student who spends significant time gambling is one rare instance of a taxpayer who has a choice.

You also correctly point out the primary "downside" to filing as a professional: The self-employment tax.

I started my blog last year primarily to discuss the various tax issues associated with gambling. I have compiled all of my posts discussing the nuts and bolts here:

Note that the posts are listed in reverse chronological order. I suggest starting from the oldest post. Scroll to the bottom and click "Older Entries" to view the older posts.

Hope that helps,