Who doesn’t enjoy a little gambling? After all, that’s what Vegas is all about. And you know what they say about what happens in Vegas…
However, for those of you who are professional gamblers, you are aware tax laws haven’t always been favorable for your line of work.
Unfortunately, it gets worse after the Tax Cuts and Jobs Act, tax reform has removed the deduction that used to be enjoyed for losses.
Let’s look at an example of this.
Alyssa, a professional gambler, wins $400,000 at the poker tables. After this elated win, she drifts over to the blackjack table where she sadly loses $500,000. During the year, Alyssa incurs $120,000 of business expenses from traveling, hotel stays, gas money, etc. So, Alyssa’s business loss for the year totals $220,000 ($400,000 – $500,000 – $120,000).
Her 2018 tax deduction for the business loss is ZERO, not $220,000.
I know things are looking pretty bleak for Alyssa, but it’s not all bad news. If you gain a profit from your gambling activities, you enjoy the Section 199A deduction. That’s an extra 20% deduction you didn’t get to benefit from a few years ago!
Let’s check out another example so you really understand this.
Maddie has net Schedule C income of $150,000 in 2018. Her qualified business income for the Section 199A deduction is $150,000. 20% of that is $30,000. Her Section 199A tax deduction is the lesser of $30,000 or 20% of her taxable income.
Suffice it to say, as a professional gambler there has never been a better reason for winning and making money.