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Gambling Changes—Tax Cuts & Jobs Act

· Gambling,Tax Reform 2017

As a professional gambler, you know that tax law did you no tax favors before tax reform.


But now, because of tax reform, tax law has you between a rock and a hard place for tax years 2018 through 2025, because during this eight-year period of darkness, you get no deduction for any part of your losses.


Example. Gordy, a professional gambler, wins $400,000 at the poker tables but loses $500,000 at the blackjack tables. During the year, Gordy incurs $120,000 of business expenses. Gordy’s business loss for the year is $220,000 ($400,000 - $500,000 - $120,000).


His 2018 tax deduction for the business loss is zero, thanks to tax reform.


We have some good news: if you make a profit from your sole proprietorship professional gambling activities, you qualify for the 20 percent tax deduction under Section 199A.


Example. Gordy has net Schedule C income of $110,000 in 2018. His qualified business income for purposes of the Section 199A deduction is $110,000, and 20 percent of that is $22,000. His Section 199A tax deduction is the lesser of $22,000 or 20 percent of his taxable income.


So, thanks to tax reform, here’s the deal: you, as a professional gambler, have but one tax-smart strategy—make money.

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