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Tax Rules to Cover Gambling Expenses

16 March 2011 by admin

Gamblers should be quite pleased with the latest ruling of the United States Tax Court in regards to gambling losses and tax deductions. Or at least professional gamblers should be.

According to the latest ruling by the US Tax Court, professional gamblers can deduct expenses along with their losses. But they can only deduct them to the extent of their losses. So no freebies if you win. But if other businesses can write off things such as travel then why should a professional gambler not be able to as well? There is no reason why not and so the US Tax Court is now allowing professional gamblers to go back over the last three years to claim expenses such as travel and lodging as deductions.

But just how is a professional gambler to be defined?

Judy Patterson, the Senior Vice President and Executive Director of the American Gaming Association, said, “To qualify, gambling really has to be a full-time activity this is the person’s principal source of livelihood. It is a pretty high standard that few will be able to meet.” And she does have a point. Many high rollers are flown to Vegas and their hotel rooms and meals comped because they are such good patrons of that casino and because the casino stands to make a decent chunk of change off of them.

As for what the Internal Revenue Service says on the subject of professional gamblers a spokesperson Raphael Tulino said, “Although the law does not define a gambling trade or business, the IRS looks to all the facts and circumstances to make a determination on a case-by-case basis.” In other words, someone how makes their living through professional gambling, such as a professional poker player, could claim their wins and losses using a Schedule C. This gives professional gamblers a means of deducting losses that are larger than winnings.

The decision of the US Tax Court is, in all reality, a victory for professional gamblers. Prior to it they had to eat their expenses on top of any losses at the tables. The appearance pre-ruling was that professional gambling was not a real profession. Now the tide is turning. Steve Johnson, who is a University of Nevada, Las Vegas Boyd School of Law professor, said, “What the decision says is that gambling is a business trade that is not any different than any other profession. A professional gambler can deduct business expenses.”

Adding his voice to ruling responses, Iowa State University’s Center for Agricultural Law and Taxation law professor Roger McEowen said, “It is important because it allows the professional gamblers to utilize negative operating losses arising from their gambling business. The rules governing operating losses have been more favorable in recent years.”

I will say that it is about time for the federal government to recognize what is a legitimate skill that is used for profit. Car restoration is a skill learned which allows for expense deductions. So why should professional gamblers, such as professional skilled poker players, not have the same option? And it seems that the US Tax Court has finally seen the light.

Now if there was only a way for US online poker players who have had to move from Washington State because of that state’s ban on online gambling to deduct moving and relocation expenses. After all, online poker is their main source of income.

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