Nightmare w Huge Edge
Of course this is all predicated on the fact that the casino thinks you have more cash than the change in the ashtray of the 94 Ford van you live in down by the river.
I only see two things wrong with this statement.Quote: AyecarumbaOf course this is all predicated on the fact that the casino thinks you have more cash than the change in the ashtray of the 94 Ford van you live in down by the river.
First, it's better than the ash tray being full of stinky cigarette butts, and at 125k, it's still a low mileage vehicle.
The only way for that to make sense and be fair is to issue a tax compensation for losses. This needs to happen even if there were no winnings.
The actual truth seems even worse. IRS sees your losses as "you gambled for entertainment and that was an entertainment spending no different than buying a beer or something" and your wins as income. Therefore if you won $5 a day and lost $4 the next day, you're not up $1. You're down $1 because taxes.
Quote: DeucekiesAgain the misconception is that the IRS is interested in being fair. They're going to make the rules to maximize their tax revenue, regardless of perceived fairness.
Also, if you do write off your gambling losses against you wins to show a reduction in the amount of your yearly win then you have to itemize. And then your lose your standard deduction. If the casino don't get you then the IRS will.
I would NOT put my entire year of play into one big hand, unless it's a guaranteed winner (not sure of a situation where this'd be the case, though).
Quote: RSThis is why it's important to get to the long run -- play enough rounds so that you're winning every year. Basically you're playing with an inversed loss rebate. From the IRS's point of view (they are on the +EV side of the loss rebate). For them to maximize their EV, a player would have to play a game with high variance -- like one [or few] big bets where there's a great chance of coming out ahead or behind. When a player plays a loss rebate, his goal is to play a high volatility game, with as few bets as possible to hit the rebate point.
What you're saying is true but that still doesn't explain or justify why the IRS or the legislators behind the IRS feel that they should have the right to screw gamblers as they so obviously do. Imagine if they tried to tell lawyers in private practice that they couldn't write off net losses in any given year. Of course, they would never try to do that because lawyers are politically powerful. They prey on the politically unconnected.
There are more than a few gamblers who able to earn around that much per year (or more) and pay the IRS nothing on those winnings. The problem from this scenario has nothing to do with the IRS trying to get their cut. The problem is trying to turn a few hundred hours of work into just a few seconds.
Quote: lilredrooster
What you're saying is true but that still doesn't explain or justify why the IRS or the legislators behind the IRS feel that they should have the right to screw gamblers as they so obviously do.
My explanation is for some strange reason they are able to get away with labeling gambling as "entertainment" and "luck" while completely ignoring EV. They see gambling wins as taxable as any other "mysterious lucky financial gain" such as capital gain, inheritance, etc. And then simultaneously they're able to see gambling loss as any other "spending", instead of losing as the intention to gain. For some reason, they're allowed (by who?) to view these as totally unrelated and unconnected.
Really, where is the EV in all this. Luck is the foundation of IRS's stance on tax and luck doesn't exist, we all know that right?
Quote: TomG
There are more than a few gamblers who able to earn around that much per year (or more) and pay the IRS nothing on those winnings. The problem from this scenario has nothing to do with the IRS trying to get their cut. The problem is trying to turn a few hundred hours of work into just a few seconds.
Gamblers paying the IRS nothing on their large winnings is a criminal offense and has nothing to do with what I'm saying. Other professions cheat too but that has nothing to do with how tax law affects them.. Why should professional gamblers be penalized by the IRS if they want to try to turn hundreds of hours of work into just a few seconds? No other profession is penalized this way.
It was not a one hand scenario, but the Revel 100k "You Can't Lose" loss rebate would've been a good example of a play that someone could've easily invested their entire bankroll, especially if they were backing a few people. With all unknowns and problems, that play was definitely something one needed you need to weigh the risk vs reward.Quote: RSThis is why it's important to get to the long run -- play enough rounds so that you're winning every year. Basically you're playing with an inversed loss rebate. From the IRS's point of view (they are on the +EV side of the loss rebate). For them to maximize their EV, a player would have to play a game with high variance -- like one [or few] big bets where there's a great chance of coming out ahead or behind. When a player plays a loss rebate, his goal is to play a high volatility game, with as few bets as possible to hit the rebate point.
I would NOT put my entire year of play into one big hand, unless it's a guaranteed winner (not sure of a situation where this'd be the case, though).
Obviously you would have would have a significant edge so that's different from what I keep saying to people who want to play high limit with thin edges. If you can't carry losses over to the next year, you can't come out ahead playing thin edges, especially on the higher limits.Quote: lilredroosterSo let's say you're tired of the bj grind. You've decided to compress your entire year into one bet. You've notice a sloppy dealer who offers you a peek at the hole card pretty often. You don't really know your exact edge but you know it's very big compared to just counting. The decks are newly shuffled. Before the first card is dealt you ask the pit if you can bet 100K on just one hand. The pit boss says okay. If you win your bet you've won 100K (let's say no double or split). You've made no other bets this year. If you win 100K you're going to owe (if your filing as a single person) at least 28K of your gambling win to the IRS and possibly more to the state. If you lose you can't write anything off. You have a theoretical edge but you just got creamed no matter what happens. Considering your net gain gain or loss you actually had a huge disadvantage. Nobody beats the IRS. Then later you realize what happened. You wake up from your nightmare and apply for a job at 7-11 which is the only kind of job you can get because you have no references from playing full time bj for the last 20 years.
board shows 4, Q, 4, 4, 4. Pot has 50BB already, you have AQ, your opponent shoves for 1000BB, do you call? (hint: you have the nuts)
Now from what I know, most casinos have capped rake. But I've played at and known some casinos that either don't have a capped rake, or have a very high cap.
My own comment on this is, similar to how IRS doesn't care what's fair for the gamblers, they just want to maximize profits, the poker room also doesn't care what's fair for players and want to maximize profits.
I'm an advocate for chopped pots should not be raked, because you can win and still lose (actually happens QUITE a lot).
Quote: AyecarumbaWhat kind of comps can a 100k per hand player expect?
If they play more than one hand a year, yeah, pretty amazing.
If they play one hand a year, I'm guessing a buffet and a room when they come back next year.
Quote: NeutrinoI'm an advocate for chopped pots should not be raked, because you can win and still lose (actually happens QUITE a lot).
The flip side of "no flop, no drop" is "flop, drop".
If it is a chopped pot, the dealer probably has more work to do - with a single winner, the pot doesn't have to be counted and split.
Rakes should be capped. The house doesn't have any skin in the game, so they shouldn't be making more than a small rake.
Quote: lilredroosterGamblers paying the IRS nothing on their large winnings is a criminal offense and has nothing to do with what I'm saying. Other professions cheat too but that has nothing to do with how tax law affects them.. Why should professional gamblers be penalized by the IRS if they want to try to turn hundreds of hours of work into just a few seconds? No other profession is penalized this way.
Gambling itself is a tax on people who don't know math. So to tax wins is definitely a double taxation. Fortunately for anyone in the US, that actually gives lots opportunities to professionals to find legal ways to reduce the tax liability on wins. If you want to argue that gambling is a unique profession you may have a valid point. If you want to argue that the taxes on winnings are penalizing gamblers you are either uniformed or lazy. Out of curiosity, what percentage of your gambling winnings gets turned over to the IRS?
Quote: TomG...So to tax wins is definitely a double taxation...
So is Social Security.
Quote: TomG If you want to argue that the taxes on winnings are penalizing gamblers you are either uniformed or lazy. Out of curiosity, what percentage of your gambling winnings gets turned over to the IRS?[/q
That was never the argument. The point which you should have realized by now is that professional gamblers are not allowed to claim net losses for any given year as virtually all other professions are. At least one state does not even allow gamblers to claim losses to offset wins in the same year while virtually all other professions are allowed to do this. I'm going to post my 1040 tax returns here for the last 10 years right after you do. What an idiotic question that was.the foolish sayings of a rich man often pass for words of wisdom by the fools around him
In pro sports, for example, does the wanna-be professional get to write off all of his/her expenses on the way up to the big leagues as losses? They were trying to be professional. Certainly, once the golfer / baseball player / etc starts to make an income they can write off expenses but not below zero. They can't carry the loss forward.
Or a movie critic. If someone decides to take up the profession of "movie critic" and write reviews online and spends $150 on movies each week and say also reviews DVDs but the web site or reviewer never gets off the ground, can that "movie critic" simply write off their losses year-after-year?
There are certain professions that the IRS recognizes and others that don't. Self-employment is one of those areas where the IRS scrutinizes carefully to ensure that the intent is to make money.
For "Professional Gambler" too many attempts have been made I am guessing to claim losses on tax returns for things that were really entertainment. I think it would be difficult on the IRS side to determine who is a professional and who is not.
In the end, what should really happen is that income from gambling should be tax-free.
Quote: boymimboClearly the act of gambling to the IRS is not a profession nor should it be viewed as such.
There are certain professions that the IRS recognizes and others that don't. Self-employment is one of those areas where the IRS scrutinizes carefully to ensure that the intent is to make money.
For "Professional Gambler" too many attempts have been made I am guessing to claim losses on tax returns for things that were really entertainment. I think it would be difficult on the IRS side to determine who is a professional and who is not.
In the end, what should really happen is that income from gambling should be tax-free.
Very good and thoughtful post. Thank you for your comments. Question for you. Do you think that it's fair that if a gambler wants to claim gambling losses to offset gambling wins in the same year the he should have to itemize his deductions? Because once you itemize you lose your standard deduction which is usually several thousand dollars. The standard deduction is allowed for yearly living expenses of all kinds. And it has to be sacrificed.
But in the US where the tax code states that you have to report income from drug sales, theft, illicit activities, virtually anything, then yeah a non-professional gambler should have to itemize the deductions. The standard deduction for HoH is $12.4K. That means that if you have more than 12.4K of gambling losses it would pay to itemize anyway since you can declare these losses anyway. So for example if you have a W2-Gs worth 20K and you have losses of 19K then you are definitely going to itemize so that you can pay income taxes based on 1K vs 7.6K.
There is a chasm where the IRS grabs you then which is essentially on the first 12,400 of winnings from Gambling. Because you can't claim that standard deduction, you have to measure the tax benefit of the W2-G with the losses incurred in receiving that W2-G. To itemize or not to itemize.
If you are a casual gambler, the truth is that you are probably not reporting:
(1) table wins from Blackjack (no W2-G).
(2) All of those comps you received
(3) all of those smaller non-W2G wins at slots (like the $1,000 .25 cent jackpot or hitting 4 deuces on a $1 machine).
The IRS recognizes that it probably is not receiving any of that tax revenue. The W2-G, antiquated as it is, catches big wins and there exists a tax chasm on your standard deduction which will cost you the difference between your standard deduction and your gambling losses.
Of course, if you are truly a professional gambler, then you avoid this by declaring all of your income and expenses on Schedule C as a small business or trade. That allows you to take the standard deduction and also allows you to take expenses to make that living (such as automobile, food, etc). This allows you to actually carry a loss on your tax return (all of your non-gambling expenses).
Quote: boymimboSo for example if you have a W2-Gs worth 20K and you have losses of 19K then you are definitely going to itemize so that you can pay income taxes based on 1K vs 7.6K.
Except that if you are a part time player and you have a job as your main source of income and you lose your standard deduction then you have still taken a big hit. Also re the point you made about the casual player not reporting - of course the vast majority of casual players do not win, they lose. And those that do have documented wins that they must report cannot carry forward losses from prior years to offset that rare winning year. So in this regard I don't think the IRS has lost much. And as you said the gambler's losses turn into profits for the casino which are then taxed which means the gambler will be offered less in terms of comps.the foolish sayings of a rich man often pass for words of wisdom by the fools around him
In Canada, gambling winnings are tax free and I doubt that US citizens declare gambling income from Canada unless they cross the border with more than 10K in which case I am betting border services is notifying the IRS.
Quote: boymimbo
In the end, what should really happen is that income from gambling should be tax-free.
This is probably the highlight of this entire thread. I'm surprised nobody brought it up yet.
From what I know, gambling wins are not taxable in Canada, UK, Germany, Australia, and much more. I can't find the complete list on which countries tax gambling income (if someone has one please share). But from all that I've read, seems like USA is the only one that taxes gambling income. (That is if you don't count countries that confiscate gambling income like China and India as 100% tax rate)
Why does USA feel like this is taxable when nobody else in the world seem to agree?
(And please don't tell me if you don't like it here GTFO, just so cliche)
IRS doesn't take anything on the jackpots if you itemize and zero out the W2-G's. It will mess with your AGI, which can be a problem for being eligible for some benefits.Quote: boymimboCorrect. It's best at that point to just record the W2-G and take your hit. This is why, in my opinion, you should be avoiding W2-Gs where possible. $1 VP Royals suck, because you really are only getting $2800 on that Royal instead of 4K, which pushes your EV down considerably (0.5% in FP JOB). Now if you have 10 of those royals, you have to itemize. This is why, if you are going to be a non-professional VP player (ie playing for less than 40 hours a week and hold another job), you need to go for giant jackpots (try a $5 machine and a 20K jackpot, and itemize) or stay below the radar ($.25 machines, $1,000 jackpots). Otherwise, really, your EV gets screwed because of the IRS take on the jackpots.
The worst offenders are the states that take an off-the-top cut (in Ohio its 3%, Louisiana 6%), then don't allow you to zero out with itemized losses.
Quote: SandybestdogBack to the original question, should you take that $100k bet? Well if you can afford to, then yes. Deal with the taxes later. Blackjack opportunities are hard to come by but when they do, it's like everything in the world suddenly makes sense. But sometimes it feels like karma catches up to you. While this is a huge edge, what would mostly happen is you get a 14 against a 10 with a 5 in the hole. Normally you would hit but in this case you stand. The next card out is a 4 and you just took your stiff hand and gave it to the dealer. I remember at the end of Moneyball when they need one more win, the commentator says something along the lines that you can use statistics all year long to get ahead but in the end it all comes down to one game, one inning, and one play. All the edge in the world can't guarantee that one win.
???
There's so many things wrong with what you just said I don't even know where to start.
Quote: lilredroosterI'm going to post my 1040 tax returns here for the last 10 years right after you do.
I wouldn't even know how to find my 1040s from years past. But if I did and posted them I already know you wouldn't do anything because it is so obvious you pay 0% in taxes on your gambling earnings
Quote: TomGI wouldn't even know how to find my 1040s from years past. But if I did and posted them I already know you wouldn't do anything because it is so obvious you pay 0% in taxes on your gambling earnings
Was that a challenge?
Excuse me while I go erase that question.
Quote: lilredrooster
What you're saying is true but that still doesn't explain or justify why the IRS or the legislators behind the IRS feel that they should have the right to screw gamblers as they so obviously do.
Because you're not "supposed to" be gambling. Gambling is "wrong". If you're a winning gambler (AP) you must be cheating and/or your wins are undeserved.
Quote: boymimboIn Canada, gambling winnings are tax free
Recreational wins are not taxable, but if you are a professional gambler (advantage player), you're considered to be carrying on a business and your wins are taxable. Casinos and lottery operators will rat you out to the CRA (Canadian IRS) if they suspect advantage play. Just thought you should know.
Quote: nvr55xxRecreational wins are not taxable, but if you are a professional gambler (advantage player), you're considered to be carrying on a business and your wins are taxable. Casinos and lottery operators will rat you out to the CRA (Canadian IRS) if they suspect advantage play. Just thought you should know.
In the U.S., recreational wins are certainly taxable.
Quote: Mission146Quote: nvr55xxRecreational wins are not taxable, but if you are a professional gambler (advantage player), you're considered to be carrying on a business and your wins are taxable. Casinos and lottery operators will rat you out to the CRA (Canadian IRS) if they suspect advantage play. Just thought you should know.
In the U.S., recreational wins are certainly taxable.
Yes, but in Canada they are not.
