New tax proposal and gambling

The new tax proposals include 2 new changes for gamblers, doubling the standard exemption (very likely) and eliminating gambling losses (50/50).

The doubling of the standard exemptions means many gamblers would have to pay taxes on another $12K in W2Gs even if they are net losers.

The elimination of gambling losses means you pay taxes on every W2G, no matter how much you lose.

If this issue effects you, the time to make your opinion known to your representatives is now. The proposal to eliminate state/local tax deductions is already being backtracked due to complaints from high tax states.

To me the issues easiest to change would be not to eliminate the gambling losses and to get the amounts on W2G raised from $1200 (how many decades has it been at this level) to $2500-$5000

I don't want this thread to turn into politics, but just hope to head off the 1000s of threads about increased gambling taxes (i.e. resort fees and parking threads)

 

The required W2G should absolutely be increased... even $5000 is probably low... as for the elimination of loss-deduction from wins, the fair way to approach this would be to tax only 25% of the win (up to, say $100,000), and have no loss deduction...so, win $5000, be taxed on $1250...no loss deduction.
Win $250,000? You'd be taxed on 25% of the first $100,000, ($25K) and then taxed on 100% of the remaining $150,000... so, you'd have $175K taxed & $75K not taxed.
I think most of us would be ok with that, as most will never have over $100K on W2Gs in a single year.

 

So, in essence, this would only hurt the wealthy?...........We know how well those plans work out.

 

No, not particularly the "wealthy"... just the very lucky!

I suppose that if a very-High Roller was risking considerably more per-bet (like $5000 per hand/spin/roll), then the 300-to-1 rule would kick in....so, no - it wouldn't adversely impact "the wealthy" any more than it does the rest of us.

 

...of course, for high-limit slots or bingo, they are screwed... anything else, they would be ok

 

I can see high limit slots areas going the way of the dinosaurs. I can also see slot makers changing games, so that max payout on a normal hit is capped at $1199 and have an extra progressive feature with payouts above $10k, because while people may be unhappy paying taxes on $1200 and still be net losers, a $10k payout even with taxes will make most everyone happy.

 

I haven't heard that there is a specific proposal related to gambling, someone please link if there is? The doubling of the standard deduction would effectively hurt however as far fewer people would itemize, I know I wouldn't.

 

I have backed off some with higher denom slots ($5-$20) because of the damned W2-g. Sure I can CURRENTLY deduct, but the initial win still hits the front page of the 1040 impacting healthcare, etc.

And, the losses are the bulk of itemized meaning I do not take advantage of the higher standard deduction.

They know we do not WIN at the casino, so why should we pay?

 

Since gambling is a negative expectation I still can't get why there is any taxes on gambling, other than for those with a "professional gambler" designation like poker players, card counters or a few sports bettors.

Yes, losses can offset winnings, but only if you have the proper paperwork and go through the process of recording and tracking all that information... which if you are expecting to hit maybe just a couple of handpays a year you likely aren't going to be doing.

 

I'd be shocked if they increased the $1200 threshold. Remember they even tried to lower it to $600. They don't want to make it easier for people to hide income. And they can claim it is easier for casinos and people to track in the internet era.

Look at how the currency transaction reporting limit has been stuck at $10k for ages as well.

They do not want to make it easier for people to move potentially untaxed money around.

 

And that requirement is so open to discussion and interpretation. Based on comments from folks on this board over the past 5+ years, almost nobody gets audited, so therefore there is very little feedback on what the IRS will accept (different than what it requires - LOL).

 

The whole gambling losses as an itemizable deduction is stupid anyway. Just go to cash accrual method of reporting gambling gains/losses. It's insane that people who take a standard deduction end up paying taxes on gambling winnings that aren't net income.

 

Dont you have to be a professional gambler to do that? I dont think you can just say you are.

 

Yes, of course. I am suggesting the law as I think it should be, not as it is.

 

Sorry, I misunderstood, I did loosely examine the proposal, and it looks like most deductions would be eliminated, It would be quite wrong to force people to report income they didn't get(not allowing offsets for losses), hopefully it doesn't end up that way.

 

Yeah, poor wording on my part. Ideally the IRS would allow internal discounting of gambling losses to offset wins as a single line item, independent of itemized deductions.

And beyond that, there's an argument to be made to eliminate taxation of all winnings anyway. The current state of the IRS rules is rather unfair, given the fairly common situation of someone losing, say, $10,000 in one calendar year with absolutely zero deductability of that loss. Then the next year, you get one big win for, say $5k, and there's no allowance to carry forward prior year losses to offset that. It's a pretty outrageously unfair way to treat gambling wins.

 

Forget even one calendar year. How often does somebody win $1,200 plus and put it all back in the same machine. Or another example. You win $1,200 and while waiting for the payout, your blow $1,200 on the machine next to it. To say that person won anything to pay taxes on is crazy.

 

The gambling loss deduction is almost certainly toast, it has got to be way down the list of deductions that might get saved. I don't think there's a chance they'll increase the W2g threshold. They're going to need every penny they can get to offset the other changes.

In principle, it's ridiculous to tax gambling winnings from slots and table games. It's a zero sum game. It's after-tax money that's getting distributed between the players and the casinos, and (far as I know) the casino gets taxed on its take. But gambling is an unsympathetic "victim."

We'll have to see how it shakes out, but I suspect it will alter the way I play. I've been able to offset every handpay I've ever gotten. If there's no deduction, I want zero handpays no matter what the threshold is.

If the $1,200 threshold stays where it is, it's going to mean either twice as much time on machines at half the per spin amount, or a way higher % of play at tables, which is bad for comps.

 

That would suck. I play mostly high limit video poker. Anywhere from $25 to up to several $500 per deal action. I would stick to table games if they don't allow deductions for w2g wins. Would certainly hurt the casino.

 

I mostly agree with Chuck but the problem is there will always be a winner and a loser...winners want to keep all the $ tax-free while losers want to write off the loss.

Person or Casino A wins $1 million and Person or Casino B loses $1 million. If B is able to write off the loss then that tax break has to come from somewhere, therefore A has to get taxed on the winnings.

If writeoffs were out of the picture maybe the taxes would follow...or at least become more favorable? Gotta wait and see how it all plays out.