Yes, tax returns are on the minds of many now, especially gamblers. Maybe 2014 was the first year you got a W-2G. Or, maybe it was the first year you happily got a lot of them. Maybe you always had been a recreational gambler but you retired from your regular job and started gambling a lot more. Or, you moved to another state, one that isn’t tax-friendly for gamblers? So many questions arise. Where do you report those W-2G amounts? What if you lost a lot more than those jackpot amounts? What if it looks like you will have to pay gambling taxes even if you lost? When might you consider filing as a professional gambler?
For many years now the book Tax Help for Gamblers has been the go-to resource for the answers to the hundreds of tax questions that gamblers have been asking. And since the government is an ever-changing river of laws and policies, it has been necessary to update this book frequently. Marissa and I have been hard at work on this project, and a brand new fully-updated third edition will be coming out at the end of this month. This time it is being published in e-Book format only, for Kindle, Nook, and Apple devices, so it can be updated more easily and more often.
For those who want a hard copy, the second edition of Tax Help for Gamblers is still available in paperback and the principles hold true, as does much of the basic information therein.
Actually this 2012 second edition tax book – plus the second edition of The Frugal Gambler and many other titles – is on sale in the Bargain Bin at ShopLVA.com, where they are having a January sale to make warehouse space for upcoming 2015 titles. Many of the deals are good only through 5 p.m. PT Friday, January 23rd, although there are always some frugal selections for your browsing pleasure.
Someone brought up an interesting point on VpFree: if a royal generates tax liability (which even a nickel royal does, even though most quarter and below hits do not generate a W2-G and can thus be concealed from Big Tax Brother), then the true payoff for a royal should be considered as (gross win)-(eventual state and federal tax liability). For instance, if you’re in the 28 percent federal tax bracket, a $4,000 royal is really only worth $2,880 to you. Now, a royal constitutes 2 to 2.5% of the total return, depending on the particular game played. Losing 28% of that would mean hacking 0.6 to 0.7% off your return–which will shove just about any positive .50 or $1 game deep into negative EV territory, considering how slim the edge is on the rare games that are positive. And naturally, if you play recreationally with a small disadvantage, the tax liability arising from W2-Gs can more than double your nominal -EV.
The only defense is to keep accurate records and file a 1040A, reporting NET wins/losses for the year. But as we know, the IRS often gets really fiddly about that. Moreover, even if there are no resultant issues, the fact remains that royals being worth less than their face value means that it’s probably foolish and unprofitable to play above .25 denominations unless you keep VERY good records AND are already substantially in the red (so that wins, rather than being income, offset previous losses).
I stopped playing dollars about ten years ago when I booked a loss for the year of roughly $6,000 but the IRS insisted that I must have actually WON eleventy skillion dollars and insisted I report to the local IRS office to have my internal organs harvested as compensation. Of course, as we all know, when we hit a $4,000 royal, we haven’t lost a single dollar up to that point, so we have $4,000 net income!!!
Thanks so much for the book Jean! My wife and I have been big fans of yours for years. We always look for you when visiting Vegas. We saw you and Brad 4 or 5 years ago a The Palms but didn’t want to bother you.
Anyway, this is the only book of yours that we have not read or purchased, as we have just been recreational (yet frugal) gamblers. However, this year we have had more expendable income. Also, one of our local Native American casinos upgraded their VP inventory to actually have some playable machines. Because of that we had our first, second, third and even forth hand pay jackpots (W-2Gs) this year. I’m sure we’ll learn more great tips just as we always have from your books.
Thanks again!
Robert & Karen Massa
Girard, KS