Using PokerTracker for Taxes...

[PShabi]

A post I just copy/pasted from the PokerTracker forums. Dude has to claim over 100k in additional income, yet only had net gains of $6,000. Rape.

From

I just spereated my sessions from gross winnings to gross losses. and I was hit by sticker shock. I play 5-8 hrs a day and 4-6 tables at mostly 5/10 limit.

I make 83K at my job, my wife makes 45K so our income is around 128k. to my surprise I have won (gross winnings) through oct. $123,410 usd
with a gross loss of 119,885.

just thinking ahead to tax time this is gonna vault me way up two tax brackets. For about 3k in winnings and another 3k in bonus.

Hardly seems fair my extra taxes will most likely be more than the 6-7k I netted.

[PShabi]

Wish I knew how to use them.



Yes, I am getting paid by my employer to do this tax research.

[Talking Poker]

I'm pretty sure I linked to all of those earlier in this thread already, pshabi. But thanks for double checking my work.

I also emailed PT support earlier today, asking them directly about adding a "Taxes" feature. Hopefully I'll hear something back from them.

As for the guy who says he's been moved into a higher tax bracket, I still have trouble believing that. In fact, I'm all but positive he's full of shit, or at least very confused anyw.ay. Isn't your tax rate based on your ADJUSTED (meaning after your deductions) Gross Income? I know you have said otherwise before, pshabi, but the losses really should come out fiurst, before the tax is calculated. Otherwise, I don't even know how you would deduct them.

In other words, like with the guy above:
128k total income = 28% tax rate (I think - I'm not looking it up). Add in the 6k net from poker and he's at 134k, which is still 28%. And that 28% is on the last of the dollars he earned, of course. That's something else people don't understand about taxes. He doesn't have to pay 28% on ALL the money he earned. The first however many thousand are taxed at 15% and so on and so forth. It's a sliding scale. Your "tax bracket" jusr refers to the last dollar you earned. IT's not the same as your effective "tax rate," which will always be lower.

If what he is saying was true, it would be:
$128k normal income + $123k poker winnings = $250k+ total income. This would be a higher tax rate. Let's pretend it's 33%, it doesn't matter. The point is, if we figure out the tax due HERE, how are we going to decuct his $120k in poker losses? It just doesn't make sense. In fact, I don't think it would even be possible.

I really think the losses will come out first and THEN we'll calculate what taxes are due based on your Adjusted Gross Income.

I just flipped thropugh a 1040 form and this is how it looks to me. Nothing else would make sense. And as ass backwards as the IRS is at times with their outdated laws and guidelines, typically when all is said and done things at least make sense. They may want you to SHOW every penny won and every penny lost, but you're only going to get taxed on the net win.

Ok.... When in doubt, read the instructions:


From what I am seeing, gambling winnings need to be reported on line 21. Gambling losses are then deducted on line 27, but only up to the amount of the winnings, of course. These, plus all your other itemized deductions are added up and deducted from your gross income, yielding your Adjusted Gross Income... and sure enough, THAT is the number that determines your tax due.

So it's all good.

[Talking Poker]

Here is another quick summary plus a few useful links:

[PShabi]

I'm going to start rereading threads I'm revisiting. I can't believe I linked to all of those! D-D-D-D-Dumbass.

Something else I've comed to realize that really scares the shit out of me. In terms of itemized deductions:

In general, if you choose not to make itemized deductions on your tax return, you get to take the "standard" deduction. From memory, I "think" this is $9500. From what I gather, if you take this "standard" deduction, then you obviously cannot itemize gambling losses.

However, if you want to itemize your gambling losses and deduct them, that would keep you from being able to take the "standard" deduction above. So, if you aren't regularly itemizing your tax return, it seems that you're going to be fucked.

I'm starting to wonder how profitable poker really is for me. Fuck life.

[Talking Poker]

Yes, that is correct. People who don't itemize their deductions will need to start itemizing. The standard deduction varies based on your marrital status, number of dependents, and so on.

Pretty much anyone who owns a house itemizes, because you get to write off your mortgage interest. Add in charitable contributions and all sorts of other stuff, and it's not hard to "Beat" the standard deduction. Hell, any poker player should be able to easily beat the standard deduction with their session losses, tourney buy ins, etc. It adds up pretty quick.

[Talking Poker]

The response I got from PT support via email a little while ago:

Sweet.

[PShabi]

I found a perfect example of how I'm getting fucked this year. Enjoy!!!



A post from elsewhere:

Let's assume a few things:

1. I am not a professional gambler.
2. I'm married.
3. I won $20000 in 2004.
4. I lost $15000 in 2004.

If I don't really have any other deductions, does this mean I get screwed big time?

Let's assume I have $1000 of deductions so I would just opt for the standard deduction. Now, because of poker, I lose that $9500 deduction, because I have to say that I lost $15000 gambling, esentially robbing me of $9500 in deductions.

Is this correct thinking? I'm just trying to get a sense of how screwed I'm getting.




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Let's just add one more assumption if no one minds:
ASSUMING NO POKER, junkmail's income was $25,000.

So, WITHOUT POKER, his AGI would be $25,000. His exemptions (assuming 1 for himself and 1 for his wife) would be $3,100 each or $6200 total. That brings him down to $18,800 taxable income. Then he takes standard deduction of $9,500 bringing his taxable income down to $9,300

WITH POKER, his AGI becomes $25,000 + $20,000 = $40,000.
He still gets the $6,200 exemption bringing his taxable to $33,800. But now he can no longer use the standard deduction of $9,500 unless he doesn't want to declare his gambling losses, so he files a Schedule A showing $15,000 as gambling losses.

This reduces his taxable income to $18,800. This means he is paying taxes on $9,500 more income ($18,800 - $9,300) even though he only netted $4,000 from his poker.

Is this correct??

Thanx so much for pointing this out and for your help!


**** What I now gather is this. The scenario where you get fucked is:

1) Non-professional
2) No itemized deductions other than poker losses.(no home ownership, etc)
3) Your net was less than $9500.

Best thing is, that's me!

It seems like this person would be the only one getting screwed and everyone else is just paying taxes? Am I right here?