Poker taxes for professionals and amateurs
Poker winnings create significant tax obligations that many players fail to recognize or manage effectively.
Professional vs. Amateur status
The IRS categorizes players as either professional or amateur based on factors like:
- Time spent playing – Professionals devote substantial time to improving skills and playing poker to earn income. Amateurs play casually or part-time.
- Skill level – Professionals have studied extensively and played at an expert competitive level. Amateurs have basic skills and play recreationally.
- Income dependence – For professionals’ poker is their primary source of income and livelihood. Amateurs have other careers and income sources.
- Dedication and focus – Professionals are dedicated to poker success, keep detailed records, and have a long-term perspective. Amateurs play loosely without such commitment.
Prostitution brings tax advantages but also greater obligations. Amateurs report winnings as recreational income.
Taxes for professional players
As small business owners, professional bandarqpoker players report income and expenses differently than amateurs:
- Professionals pay self-employment tax on net poker earnings instead of income tax. The current rate is 15.3% covering social security and Medicare obligations.
- Hourly, daily, monthly, and yearly poker earnings are reported on Schedule C as gross business income.
- They deduct typical business expenses on Schedule C: travel costs, tournament buy-ins, and fees, educational materials, home office space, etc.
- Major assets like computer gear and tables depreciated over time on Schedule C to recoup costs.
- Net profit/loss after deductions is reported on the 1040 form. Loss years balance out winnings to reduce tax burdens.
Key tax deductions for professionals
Some major tax deductions applicable to poker pros include:
- Travel – Airfare, hotels, transportation, parking, tips, and more related to poker play at events away from home.
- Meals – Food and drink during play or travel for poker is 50% deductible. Per diems claimed instead when traveling.
- Supplies – Poker tools like software, books, training courses, and other relevant educational materials.
- Tech gear – Computers, phones, tablets, monitors, and other electronics used for poker play or study.
- Home office – Rent, utilities, furniture, etc. partially deducted based on office space size used exclusively for poker.
- Online fees – Site fees, payment processing costs, and subscriptions for playing online or entering online events.
- Memberships – Dues paid to staking services, training sites, player communities, and other poker organizations.
Thoroughly logging and categorizing expenses all year ensures you leverage all allowable deductions come tax time.
Reporting tips to avoid audits
When reporting as a pro, certain practices avoid IRS scrutiny:
- Claim a credible number of playing hours that supports your income. 60-80 hours per week is typically believable for a pro.
- Report income across multiple sites/venues. Avoid claiming all income came from just one place.
- Show steady playing activity and income throughout the year. Avoid huge spikes or extended gaps without play or earnings.
- Report some small losing months/years amidst consistent overall profitability. Never claim to win massively every single period.
- Keep all records meticulously organized by category and period. Expect an audit down the road and be ready to present thorough documentation.
Avoiding obvious discrepancies and presenting a credible, consistent poker business reduces audit risk and tax headaches.