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Poker Taxation - Filing as a Professional Player
As the IRS continues it reform of online poker taxation it seems that internet poker players have more options than ever, one of them is to file as a professional player. As it may sound odd a poker player that files as a pro might take advantage on many poker taxation deductions that were unavailable in the past.
A professional poker player that files as a pro at the IRS for taxation reasons is actually declaring himself as a business in the full sense of the word. In a decision from 1987 at a US court judges stated the following: “If a tax payer dedicates his time doings to gambling and it is his deliberates source of revenue source…his action be regarded as a trade or business just as any other readily established activity".
And so the US court made it possible for professional poker players to report any expenses made by them involving poker as deductible expenses. In fact poker players can deduct numerous poker-related expenses such as books, traveling costs, accommodations such as when participating at poker tournaments. Though players must pay self-employment taxes, which are approximately 8% of your profits the gain is still high.
If you file as a professional poker player you are qualified for a Self Employment individual Retirement Plan (SEP IRA). This plan gives you a taxation shelter of up to $40,000. This means that your taxable income is untouched, the most 20%-25% of it. Poker winnings taxations would grant you this possibllity if you file as a professional poker player.
As for now the IRS doesn’t have an official policy for filing poker players so you can place your poker incomes under Section C in page 1 of Form 1040 instead of under "Other Income" and you may place your loses under "Other miscellaneous deductions" placed on Schedule A. Notice that filing as a professional poker player for purpose of taxation deductions and benefits are useful only to poker players that show a steady profit.
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