Tax Consequences of Gambling: Professional vs. Nonprofessional, OBBBA Changes, Expense Deductions

As defined by the IRS, "Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos." The popularity of games of chance, including poker, slots, fantasy sports, and online gambling, has led to increased tax reporting of these activities. Whether for pleasure or a line of business, the tax implications of gambling activities are unique and complex. 

There are distinct differences in the taxability and reporting of gambling income and expenses for professional and casual gamblers. Prior to TCJA, taxpayers whose trade or business was gambling could deduct ordinary and necessary business expenses in excess of gambling income, creating a tax loss. The TCJA, however, limited the deductions allowed to the amount of income from these activities. Under the OBBBA, this provision was made permanent. As an added complication, OBBBA also limits losses from "wagering" transactions to 90%. 

Further complexities include the required reporting of gambling winnings on Form W-2G. The reporting threshold varies depending on the type of wager. Slot machine winnings, keno winnings, and poker tournament winnings are subject to different threshold reporting requirements: $2,000, $1,500, and $5,000, respectively. Participants in gambling activities and their advisers need to understand the taxation of these winnings and the recent impact of OBBBA on these activities.

Listen as our panel of individual income tax experts explores the taxation of gambling income, the related deductions, and the effect of OBBBA on gamblers. 

I. Taxation of gambling income – introduction

II. Types of gambling income

III. OBBBA changes

IV. Professional gamblers

V. Nonprofessional gamblers

VI. Complimentary goods

VII. Expense deductions

VIII. W2-G reporting and withholding

IX. Recordkeeping

X. Gambling sessions

The panel will cover these and other critical issues:

• Tax reporting differences for professional and nonprofessional gamblers
• OBBBA changes to deductible gambling losses
• Required Form W-2G reporting for gambling income
• Ordinary and necessary business expenses for professional gamblers

Learning Objectives

After completing this course, you will be able to:

• Identify types of gambling activities
• Determine how OBBBA changes impact loss deductions
• Decide strategies to mitigate taxes paid on gambling income
• Ascertain how recordkeeping can be used to substantiate deductions

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of individual income taxation, including itemized deductions, individual income tax credits, net operating loss limitations including carrybacks and carryforwards.

  
  

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).