Taxes on Video Poker Promotions

I've searched this forum and I've read early editions of the Tax Help for Gamblers, but I cannot find an answer to this. Sometimes my local casinos have promotions where you earn dining credits, slot points, etc, if you clear a certain number of points in video poker. So for example, let's say a casino will award you a $25 dining credit for clearing 200 points. Let's also say that you put in $300 into the machine and ended up with $200 after clearing the required points.

Assuming you use the full dining credit, do you report this transaction as:

1. A separate $25 gain and $100 loss.
2. A $75 loss
3. Only a $100 loss since the $25 is somehow considered a non taxable comp

Before you say it, I know this will only apply if one files as a non professional gambler. I also know that I'm always better off consulting a tax professional, but I want to make sure that it's just not an obvious answer. And I know that if the answer is either 1 or 2, then we're just talking about a change in AGI, as the net bottom line taxable income will be the same.

In my opinion, I definitely see valid argument for options 1 and 2. I can see reporting it separately because you may redeem the certificate at a later date, which would lend credence to it being a separate transaction. On the other hand, you are expecting to earn that $25 value when you play the game, so it's almost an inherent part of the session (one might not even play if they don't get it); so in that sense, I can see it being part of the session. I also feel like this whole area is gray for the IRS, so you'd probably get different answers from different IRS agents.

Anyway, sorry for the long thread, any help is appreciated.

Personally, I think #3 is a valid choice. They write it off as a cost of doing business, it (the food voucher) has no cash value. Are you charging yourself for the drinks they bring as part of most casino play, that if you order them in a bar, will cost your wallet? Or if your status allows you to park for free in a charged valet or garage concession? If so, you're about the only person I know who is.

I would write the day up as a $100 loss in my diary.

Quote: beachbumbabs

Personally, I think #3 is a valid choice. I would write the day up as a $100 loss in my diary.

What BBB said. As I understand it, the IRS agrees free hotel rooms, meal comps, and other freebees are considered non-taxable "inducements to play" given to you by the casino and do not factor in your wins and losses.

A meal isn't taxable, unless it's part of an extended cruise, as one example.

I'd go the #3 route. It's a $100 loss.

#3... it's a $100 loss.

Thanks for the replies. I'm surprised that #3 is the concensus. I thought that if you had to play to win something, then that something was taxable? And if the comp was discretionary (i.e. the casino chooses to give you something), then it's not taxable? I could easily be mistaken here. I would argue that free drinks, a free room, etc are discretionary because the casino is just choosing to gift these to you. Yes, they expect to get something out of it, but there's no guaranteed exchange here. However, the dining credit in the example is not discretionary because you have to technically earn it. In other words, they're not giving it to you for nothing, and they are forced to give it to you if you earn it. So that would be my argument for comparing this to free drinks, free rooms, etc.

As for benefits you get for reaching tiers, I don't have a good argument for that. They are giving you concessions based on certain amount of play, and I agree that no one is deducting the value of valet or discounted buffets. I don't know, maybe technically you're supposed to report those things? Or maybe #3 is the right answer? Or maybe, just maybe, the IRS needs to clarify taxes for gamblers.

They've clarified enough... $1200+ on a slot/VP machine gets reported. At the end of the year you're supposed to report your gambling winnings (not comps).

Taxing individual gamblers is pretty stupid, IMO, due to the fact that 99.99% of people play a losing game, thus they're EXPECTED to mathematically LOSE yet the government is still like "yeah you're gonna lose that, so give me a chunk of it while you got it" if you're lucky enough to be ahead at any point.

I don't think any of the 3 is correct. Several tax sites says comps are taxable, They must be reported as income. The question is the actual value of said comp. If the casino says it's a S1,000 computer you won, but Walmart sells if for $500, you can report it as a $500 comp. Same rules as money won. You know, if you itemizes, you can not deduct gambling losses that led to the comp. You can wind up due to winning with a high AGI but a low income. reducing or limiting entirely some tax credits or deductions.
Never forget why the tax code is what it is and do not expect any real changes. The tax code is how politicians reward friends and punish enemies.

Quote: CD

Thanks for the replies. I'm surprised that #3 is the concensus. I thought that if you had to play to win something, then that something was taxable? And if the comp was discretionary (i.e. the casino chooses to give you something), then it's not taxable?

I've seen one website claim comps are taxable.

However,
(1) I have a professional gambler friend (part of a pro table/slot team where they even issue members tax forms, and they record machine numbers of slot machines for possible audits), who uses a professional tax accountant, and the tax accountant never asks for comps.
(2) Most websites say comps (food, hotel) are not taxable.