Gambling losses deducted at 90% instead of 100% in new tax bill

Quote: tuttigym

Quote: Theguyoverthere

This isn’t nearly as bad as I thought at first. It just really requires you to have all your losses documented, otherwise anyone can just input (gambling wins / 0.9) in the gambling loss box and bingo you’re good to go. And most recreational gamblers will have at least this 10% disparity in wins and losses as 10% is a pretty typical hold % for slot machines. And at the end of the year if you find yourself not losing enough you have a fun freeroll to go to Vegas and gamble, knowing if you lose, well, you were gonna give 30% of that to taxes anyway! ;)
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I am guessing that most "recreational" gamblers like myself, do NOT even report their wins to the feds since casinos do not provide W2G's on table game wins.

tuttigym
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I would be very surprised if more than 1% of recreational gamblers report winning unless they get an automatic reporting.

so For a ploppie:
if $10k in w2-g forms but $15k in losses.
can only deduct $9k and owe tax on $1k?

From what I've read or perceived, you can figure $13.5K in losses ($15K x 90%) and use $10K of that against your W-2G's of winnings and owe no tax if it were as simple as that. The phantom tax on $1.5K got buried in your extra losses.

Quote: ChumpChange

Quote: 100xOdds

so For a ploppie:
if $10k in w2-g forms but $15k in losses.
can only deduct $9k and owe tax on $1k?
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From what I've read or perceived, you can figure $13.5K in losses ($15K x 90%) and use $10K of that against your W-2G's of winnings and owe no tax if it were as simple as that. The phantom tax on $1.5K got buried in your extra losses.
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Correct. The maximum losses you can deduct is the smallest of (a) 90% of your losses, (b) 100% of your wins, and (c) $25,000, minus 10% of the amount by which your total income exceeds $150,000.

In 100xOdds' case, the smallest of 90% of $15,000 (which is $13,500), 100% of $10,000 (which is $10,000), and $25,000 is $10,000, so you can deduct $10,000.

Quote: ThatDonGuy

Quote: ChumpChange

Quote: 100xOdds

so For a ploppie:
if $10k in w2-g forms but $15k in losses.
can only deduct $9k and owe tax on $1k?
link to original post

From what I've read or perceived, you can figure $13.5K in losses ($15K x 90%) and use $10K of that against your W-2G's of winnings and owe no tax if it were as simple as that. The phantom tax on $1.5K got buried in your extra losses.
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Correct. The maximum losses you can deduct is the smallest of (a) 90% of your losses, (b) 100% of your wins, and (c) $25,000, minus 10% of the amount by which your total income exceeds $150,000.

In 100xOdds' case, the smallest of 90% of $15,000 (which is $13,500), 100% of $10,000 (which is $10,000), and $25,000 is $10,000, so you can deduct $10,000.
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wait.. you're capped at $25k losses if over $150k agi?
Never saw that mentioned in the bill before

Quote: 100xOdds

Quote: ThatDonGuy

Quote: ChumpChange

Quote: 100xOdds

so For a ploppie:
if $10k in w2-g forms but $15k in losses.
can only deduct $9k and owe tax on $1k?
link to original post

From what I've read or perceived, you can figure $13.5K in losses ($15K x 90%) and use $10K of that against your W-2G's of winnings and owe no tax if it were as simple as that. The phantom tax on $1.5K got buried in your extra losses.
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Correct. The maximum losses you can deduct is the smallest of (a) 90% of your losses, (b) 100% of your wins, and (c) $25,000, minus 10% of the amount by which your total income exceeds $150,000.

In 100xOdds' case, the smallest of 90% of $15,000 (which is $13,500), 100% of $10,000 (which is $10,000), and $25,000 is $10,000, so you can deduct $10,000.
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wait.. you're capped at $25k losses if over $150k agi?
Never saw that mentioned in the bill before
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My mistake - I was mixing up the limit on gambling losses with the maximum you can deduct for tips. If your AGI is $150,000 or more, then you can't deduct tips.

There is no $25,000, or any other, limit on gambling losses besides the smaller of 90% of losses and 100% of wins.

Gambling With an Edge - Russell Fox - 1 hour ago (New 90% loss topic) - If your losses are 111% of your wins or higher, you don't owe taxes on the wins. This could apply to 90% of gamblers who face an 11% HA on their slot machines of choice. For other gamblers eeking by on slim margins of 2%-4% on Player Advantage, this will wreck their career unless they are off the grid.

Quote: ChumpChange

Gambling With an Edge - Russell Fox - 1 hour ago (New 90% loss topic) - If your losses are 111% of your wins or higher, you don't owe taxes on the wins. This could apply to 90% of gamblers who face an 11% HA on their slot machines of choice. For other gamblers eeking by on slim margins of 2%-4% on Player Advantage, this will wreck their career unless they are off the grid.

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If your losses equal your wins, there is no profit to tax. We don't tax losses. It's Un-American, and it's the basis of the entire system. If Hollywood could only write off 90% of expenses, no film would be made.

But if you have a profit three out of five years and otherwise do your gambling in a businesslike manner you are a business and can file Schedule C. Even with the added 15.3% (really 14.1%) FICA tax it is still better to show a few hundred or thousand of gains if it means you still get the standard deduction. Also, if you are actively in the business, you get the entitlement of the 20% qualified business income deduction so your income taxes are going to be lower than if it wasn’t treated as a business.

Quote: calwatch

But if you have a profit three out of five years and otherwise do your gambling in a businesslike manner you are a business and can file Schedule C. Even with the added 15.3% (really 14.1%) FICA tax it is still better to show a few hundred or thousand of gains if it means you still get the standard deduction. Also, if you are actively in the business, you get the entitlement of the 20% qualified business income deduction so your income taxes are going to be lower than if it wasn’t treated as a business.
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I've been extolling the many benefits of being self-employed for years, but some people are simply addicted to paying taxes, while others are repulsed by the 15% self-employment tax, unaware that they are already paying half of it. The tax code benefits the business owner far more than the day laborer, but you get to decide who is a business owner.

Quote: calwatch

But if you have a profit three out of five years and otherwise do your gambling in a businesslike manner you are a business and can file Schedule C. Even with the added 15.3% (really 14.1%) FICA tax it is still better to show a few hundred or thousand of gains if it means you still get the standard deduction. Also, if you are actively in the business, you get the entitlement of the 20% qualified business income deduction so your income taxes are going to be lower than if it wasn’t treated as a business.
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I've been extolling the many benefits of being self-employed for years, but some people are simply addicted to paying taxes, while others are repulsed by the 15% self-employment tax, unaware that they are already paying half of it. The tax code benefits the business owner far more than the day laborer, but you get to decide who is a business owner.

BTW- If your business doesn't make a profit in the first four years, the IRS may close you down, but there is nothing to stop you from opening a new business

Do you have to log over 1000 hours of gambling time per year in your gambling diary to even count as a pro?
Do you need to win $50K or $100K per year to make it worthwhile to file as a pro?
What if you win $100K but only gambled 200 hours?
I'm probably missing the losses ledger, I wasn't counting that in these questions yet. These are net wins.

Quote: ChumpChange

Do you have to log over 1000 hours of gambling time per year in your gambling diary to even count as a pro?
Do you need to win $50K or $100K per year to make it worthwhile to file as a pro?
What if you win $100K but only gambled 200 hours?
I'm probably missing the losses ledger, I wasn't counting that in these questions yet. These are net wins.
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I thought that if a significant portion of your income is from gambling you could file as a pro. But, I haven't kept up on changes in the last five years or so.

I’m using the Section 183(d) presumption of profit. See this IRS audit manual, page 17. https://www.irs.gov/pub/irs-pdf/p5558.pdf

The “professional” gamblers who were trying to zero out their gains generally lost way more than they gained, consistently, and did not play their games in a businesslike manner. But as long as you show a profit, you do not need to do it on a regular basis. If you did plumbing and roofing on the side, you still pay self employment tax even if it is a few hours a month. I used to drive Lyft and made a couple of thousand a year and still filed SE.

Under 2025 law I expect to be profitable since I am up five figures this year and don’t expect to give it all back. I already write my winning and loss in a log (pocket monthly calendar), save my ATM receipts, and target using free play, multiplier days, and other ways to stay profitable. My greatest house edge game I play is at a 2.5% disadvantage which should put me well under the 10% “loss limit” in order to stay paper profitable for 2026, if not cash profitable. If Congress doesn’t repeal the law by October 15, 2026, I will file as a professional gambler for 2025, be profitable after the 10% loss reduction for 2026, and likely meet that criteria in 2027 as well. I also would not mind taking this to Tax Court either, if they want to deny the plain language of Section 183. But I disagree that being a professional means that you have to make it your sole or primary profession. You just have to operate professionally.

I’m using the Section 183(d) presumption of profit. See this IRS audit manual, page 17. https://www.irs.gov/pub/irs-pdf/p5558.pdf

The “professional” gamblers who were trying to zero out their gains generally lost way more than they gained, consistently, and did not play their games in a businesslike manner. But as long as you show a profit, you do not need to do it on a regular basis. If you did plumbing and roofing on the side, you still pay self employment tax even if it is a few hours a month. I used to drive Lyft and made a couple of thousand a year and still filed SE.

Under 2025 law I expect to be profitable since I am up five figures this year and don’t expect to give it all back. I already write my winning and loss in a log (pocket monthly calendar), save my ATM receipts, and target using free play, multiplier days, and other ways to stay profitable. My greatest house edge game I play is at a 2.5% disadvantage which should put me well under the 10% “loss limit” in order to stay paper profitable for 2026, if not cash profitable. If Congress doesn’t repeal the law by October 15, 2026, I will file as a professional gambler for 2025, be profitable after the 10% loss reduction for 2026, and likely meet that criteria in 2027 as well. I also would not mind taking this to Tax Court either, if they want to deny the plain language of Section 183. But I disagree that being a professional means that you have to make it your sole or primary profession. You just have to operate professionally.

So if you are legibly ahead for year one but not year two, but ahead on year 3, but not year 4, everything rests on you being ahead on year 5 for you becoming a gambling pro. You're not a gambling pro until you rack up 3 years of profit out of 5. I don't know what happens after that. Do your pro points disappear after two losing years in a row again?

Look at the PDF on page 18 for an example. You can also file a Form 5213 if you want on your first profit year to start the clock. The issue is that will leave you open for audits an additional five years, so few people do that. My profit years are 2025 and 2026 (assuming the new law), for my 2025 return I file Form 5213 by April 15, 2029 so that 2025, 2026, 2027, and 2028 count for the presumption (Section 183(e)(2)). The audit window for 2025 is extended to April 2032, but I can see if I benefit from the IRS having to prove I am not a professional. Normally it is the opposite, you have to show how you are professional which you can do by making it a regular activity. But even occasional activities can be for profit.