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The year is drawing to a close and, before we know it, tax season will be upon us. This year’s filings could be quite different and poker players in the U.S. need to start preparing now to ensure they adhere to the unprecedented changes brought about by the Tax Cuts and Jobs Act of 2018 (TCJA). It will save a lot of stress and keep the IRS off your back.
The TCJA was a complete overhaul of the tax system in the U.S. and has implications for the poker community, as well. Being a casual, recreational poker player has different tax implications than does being a professional player. These differences can determine how taxes are filed and how earnings are reported, so it’s important to understand the system.
All gambling winnings are reportable. In some cases, casinos may issues players a W-2G – Certain Gambling Winnings. The form is provided to players who earn more than $600 in net earnings, or at least 300 times the amount wagered. Since the casinos are also required to withhold 24% on net winnings of more than $5,000, there are a lot of details that have to be included when giving Uncle Sam his annual allowance.
Recreational gamblers can deduct their losses as an itemized deduction on a Schedule A form. Winnings are listed on Line 21 of Form 1040 under “Other Income.” Professional gamblers, on the other hand, should report their profits and losses on Schedule C – Profit or Loss from a Business. A professional gambler can reduce the amount of income earned by listing certain gambling losses on the form.
There is a lot to be considered when filing taxes, but the consequences of not taking adequate measures to be thorough can cost you money and, in some cases, have the IRS knocking on your door. Start preparing now in order to be better prepared when you submit your tax returns.