US Tax Season Around The Corner for Poker Pros
It is said that there are only two certainties in life: death and taxes. As annoying as though it may be, the US tax season has once again come knocking. It may be true that tax returns are only due in April, but the time to start preparing for everyone’s least favorite time of the year, is now. Four months may seem like ample time, but every Poker pro agrees that it best to get it over and done with enough time to spare, because this is one deadline that nobody should miss.
What’s more, the recently instituted Tax Cuts and Jobs Act of 2018 (TCJA) has brought about some changes to current tax structures, and individuals are advised to familiarize themselves with the changes in as far as what they are applicable.
Gambling Income Not Tax-Exempt
Some of the more prominent changes to the current tax structure include amendments to estate duty exemptions, changes to the taxation of foreign income, an increase in individual alternative minimum taxable income, and, unfortunately, the elimination of quite a number of tax breaks.
Tax scales applicable to gambling proceeds, too, have been affected quite drastically. According to US law, all gambling winnings have to be declared. Some players may receive a W-2G Form from their local casino, most notably in cases where winnings have exceeded 300 times the amounts that have been wagered, or, alternatively, where winnings for the current year have exceeded $600.
In cases where individuals are subject to the withholding of federal income tax, casinos are required to withhold 24% of all winnings exceeding the amount of $5,000.
Recreational Vs. Professional Poker
For those gamblers merely playing recreational bets, all wagers and bets made throughout the year must be declared under the category of Other Income. Players may however deduct their losses, but the downside is that this requires quite a bit of admin, as these must be listed individually on an annexure to the standard returns form.
As for professional Poker players, the ball game changes a bit due to the fact that Poker is their primary source of income. All winnings and losses are offset in a specific way, as winnings are deemed to be income generated from the workings of a business. In a lot of ways, this particular type of return looks more favorably on the player, as it allows for the deduction of losses as well as expenses, similar to the returns made by a typical business owner.