A large number of gamblers are not professionals. However, some people’s gambling activity reaches the point where it is their trade or business. These individuals should be concerned with professional gambler tax planning, bookkeeping, and accounting.
How Professional Gambler Bookkeeping Records Winnings and Losses
The tax filing status of an individual will impact how their gambling losses or winnings get recorded by a professional gambler CPA. If a taxpayer can say that gambling is their business, then some of their expenses, losses, and winnings should be recorded on a schedule C. However, casual or amateur gamblers will report their winnings on line 21 of form 1040. They may report their losses on line 28 of schedule A. They could record it as miscellaneous itemized deductions. In either case, the amount of deductions a professional gambler accountant can record for gambling losses is limited based on the amount of gambling winnings their client has.
How the Tax Cuts and Jobs Act of 2017 Affects Professional Gambler Tax Planning
All taxpayers may have to report their gambling winnings. The amount they can deduct when their gambling reaches the point of being a trade or business is limited to the amount they win. Professional gambler bookkeeping cannot show a net operating loss from gambling activities. However, there was a workaround. Prior to the TCJA, a professional gambler CPA could deduct business expenses over their client's net gambling winnings. This meant that professional gambler bookkeeping could show a net operating loss from their gambling activities. However, the TCJA amended Sec. 165(d). Now, the limitation on losses from gambling transactions applies not only to what a professional gambler loses by wagering but also to any expenses incurred in connection with gambling activities. This may include things like travel, hotel stays, food, and other expenses. Fortunately, here at Fusion CPA, we have a team of accountants familiar with the impact the TCJA has had on a professional gambler’s ability to deduct expenses. Our goal is to work with you to create new tax strategies based on changes to the tax law.
How the Law Defines Gains from Wagering Transactions
The amended Sec. 165(d) adjusted the definition of losses from wagering transactions, but the definition of gains has not changed. Although it didn't change, the definition of gains is somewhat ambiguous. According to law, gains are defined as the actual product of wagers made by the taxpayer. However, it does not mean in the return of capital. If a person spends five dollars on a lottery ticket and they win $500, they are able to exclude the original five dollars from the gross winnings. If that same person purchased 10 lottery tickets and only one of them was a winner, they cannot deduct the amount they spent on non-winning tickets. With deductions, losses from wagering need not be related to gains. A person could lose $1,000 playing poker in one casino and use those losses to offset winnings they make wagering in a different casino on a different day.
Benefiting from the Advice Provided by a Professional Gambler Financial Adviser
Here at Fusion CPA, we offer professional gambler CFO business advisory. We work with professional gamblers, helping them identify tax strategies to minimize their liability and maximize the number of their winnings they can take home. The IRS may scrutinize the tax returns of professional gamblers. Our professional gambler financial advisers are here to help you make sure that your bookkeeping and tax planning are accurate and that you are in compliance with IRS regulations. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.