Understanding Taxes on Poker Winnings

Nobody is excited to pay their taxes. However, it is one of those chores we all must do at a certain point in life. The bad news is that there isn’t a course that helps many people understand how to pay their taxes. Some may say that paying taxes isn’t tricky enough to require a course. After all, we all understand how to do it. However, the truth is that it can be pretty confusing for some.

For example, many people are confused about “taxable income.” Nobody wants a visit from the IRS, especially not when back taxes are involved, and one of the big reasons people get a call from them is that they didn’t pay their taxes correctly or filed expenses under the wrong category. Poker players and their earnings are examples of people not understanding what constitutes taxable income.

The Basics

First of all, we have to come to an understanding regarding poker earnings. Namely, are poker earnings considered taxable income by the Internal Revenue Service (IRS)? Some may be chagrined to find out that the answer is yes. Any gambler who has made a buck playing poker must report that in their annual earnings, regardless of the amount. As the enforcer of these tax laws, the IRS plays a crucial role in this process.

Some might argue that it shouldn’t be reported because the amount they made playing poker was negligible. Whether you agree with that statement or not, the law remains consistent. Regardless of the amount earned, a poker player must report their earnings. Whether you’ve made one dollar or one million dollars, the IRS has to know about it.

There is a caveat worth bringing up here: not all countries have consistent laws regarding this. Some countries may not view poker earnings as taxable income. However, in the United States, where the IRS operates, the law states that any earnings made from gambling are considered taxable income.

The Requirements

Now that we know that poker earnings are taxable, what is next? Obviously, we have to talk about the requirements surrounding reporting poker winnings or gambling winnings in general. Luckily, some gambling establishments make it very easy for their patrons. Usually, in most land-based businesses, a player might get a form from the casino that is already adequately filled out and goes directly to the IRS.

Usually, players get this form if they’ve earned a hefty sum ($500+). So, if you are lucky enough to be playing poker, ask to receive this form. You must do it personally if the casino does not issue it themselves. US citizens ought to fill out form W-2G, which is related to taxation on any earnings made through gambling.

Remember, these rules also apply to online poker websites. Online casinos can’t issue a form, which means that if you are an online player, you must be ready with the Form W-2G. It may be a bit more inconvenient, but it is the price we pay for having poker games freely available to us at all times, at the press of a button.

Deducting a Loss

Something we all look for when doing our taxes is what expenses we can deduct. Naturally, poker fans do the same thing. This brings us to the question: can you deduct poker losses when calculating your taxable income? The answer is yes. However, there are some rules that you have to follow. Let’s take a look at some of the basics when it comes to deducting poker losses from your taxes.

First, you must maintain a thorough and accurate record of your poker sessions, including wagers, buy-ins, cash-outs, and other related expenses. After that, you will have to itemize your deductions properly, making sure to be as accurate as possible. You start deducting from your taxable income only when you’ve done that.

Amateur vs. Professionals

Now that we’ve looked at all aspects of poker winnings and taxation, we should briefly discuss the differences between how an amateur might file taxes and how a professional should do it. Taxation is simple for amateur poker players; any poker winning should be filed under “other income,” the deductions are related solely to the amount they’ve won or lost.

On the other hand, professional players can get away with filing certain aspects of the job as deductible income. For example, traveling to and from the various poker tournaments they might be involved in could be seen as a business expense and, therefore, should be filed. Lodging and entry fees could also be seen as business expenses. This is an important bit of information to keep in mind when paying your taxes.

FAQ

Do poker winnings qualify as taxable income?

Poker winnings most certainly qualify as taxable income in various countries, including the USA.

What form do I have to file regarding taxation on poker earnings?

Form W-2G is the one you are looking for. Luckily, many poker rooms might give out this form when you win a particular sum.

Can I deduct poker losses from my taxable income?

Yes, however, there are some rules that you have to follow and keep in mind.

Can professional poker players deduct certain expenses from their taxable income?

Yes, lodging, travel, and tournament entry fees could be business expenses.

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Scott Baber: Senior Managing editor

Manages incoming enquiries and advertising. Based in London and very sporty. Worked news and sports desks in local paper after graduating.

Email Scott@MarkMeets.com