Taxes

Quote: FinsRule

I’m comfortable playing $10 blackjack. Let’s say my annual income is around 150. That would mean i would need an annual income of 15 mil to play $1000 a hand. Sounds about right.

I don’t think it scales linearly.

Quote: unJon

I don’t think it scales linearly.

I think it does scale pretty close to linearly actually.

Someone who makes 1 mil a year should not be playing $1000 BJ hands on anything close to a regular basis if they are a recreational player.

As Crystal points out the AGI consideration if you are not concerned about the federal implications (ie. deduction phase out etc.) is really for your state income tax purposes. I am not sure about NY but most states start their tax calculations with your AGI from your federal return. So let's consider the following hypothetical situations to illustrate your possible choices:

Total W2G's for the Year $125,000
Total Win using Session Accounting $18,000
Total Losses using session accounting $24,000

So if you go with the report every W2G method your federal AGI will be $125,000 higher which means you are going to owe state income tax on additional $125,000.

On the other hand if you use session accounting your federal AGI will only be $18,000 higher and that is the additional amount you will owe state tax on.

One other thing to point out - definitely research whether the state of NY will allow session accounting. The allowance can vary state by state and sometimes states have not even made a determination. If the state has not made a determination then you should look for their definition of starting income - if it says federal AGI explicitly without adjustments then I would say you could probably use session accounting in that state.

Let me finish by caveating that I am not a tax professional just someone who used MBJ's great article as a starting point and did some in-depth research on state tax implications because of my high W2G total in 2018 (had a high W2G total but ended up a net loser for the year). In my own personal situation my state explicitly allows session accounting and it ended up saving me around 6k in state income tax.

Hopefully this information will help you out.

Thanks, sltploppy, I didn't understand that state taxes are sometimes based on AGI before deductions are considered. Yet another reason that gambling taxes are unfair and ought to be abolished!

I updated the article to address this potential problem.

As I continue to research all of the tax laws surrounding gambling I think that the session accounting method may be my best bet.

I emailed the New York State tax department to get clarification on if they except this. Since I couldn’t find anything on their website.

Granted the W2G I received is based on actual online gambling where every transaction is recorded. I plan on pouring through these documents. To construct the actual gambling sessions. Each 24 hour day will constitute as one session based on my readings.

My overall tax owed on winning sessions will be significantly lower than what was listed on my W2G for last year. That amount could then be written off on my itemized deductions since I did incur a loss throughout the year.

So my AGI will increase, but not at the $318k figure that is listed on my W2G.

My question is will the casino report the W2G to the IRS?

Quote: BV3273

As I continue to research all of the tax laws surrounding gambling I think that the session accounting method may be my best bet.

I emailed the New York State tax department to get clarification on if they except this. Since I couldn’t find anything on their website.

Granted the W2G I received is based on actual online gambling where every transaction is recorded. I plan on pouring through these documents. To construct the actual gambling sessions. Each 24 hour day will constitute as one session based on my readings.

My overall tax owed on winning sessions will be significantly lower than what was listed on my W2G for last year. That amount could then be written off on my itemized deductions since I did incur a loss throughout the year.

So my AGI will increase, but not at the $318k figure that is listed on my W2G.

My question is will the casino report the W2G to the IRS?

Yes the casino will report the W2G. That’s why you should send a letter with your taxes explaining that you used the session method, which is why you reported an amount different than the W2G.

I efile usually. Is there a way to submit a note with that?

Probably depends on the software, but if it doesn't let you, you can send the letter separately. Just make sure it's got your name, SS#, and identifies that it's for your 2018 Form 1040.

Thanks! Has anyone out there done this before?

Quote: BV3273

Thanks! Has anyone out there done this before?

Please don't tell me you are NOT going to use a professional trained and expert in this unusual type of situation......!!