you report on Schedule C.
Professional Gambler Tax
A professional gambler is classified as a trade or business. A profit motive is necessary for an activity to be classified as a trade or business. In determining whether an activity is engaged in for profit, all facts and circumstances with respect to the activity are to be taken into account. No one factor is crucial in making this determination. The following factors are considered:
- Manner in which the taxpayer carries on the activity: If the taxpayer conducts gambling activities in a businesslike manner, such as maintaining complete books and a gambling log or diary, this can be indicative of a profit motive.
- Expertise of the taxpayer or his advisors: Preparing for gambling activities by extensive research and consulting with experts may indicate that the taxpayer has a profit objective.
- Time and effort expended by the taxpayer in carrying on the activity: A taxpayer who devotes much time and effort to conducting gambling activities may show an intention to make a profit.
- Expectation that assets used in activity may appreciate in value:
- Success of the taxpayer in carrying on other similar activities
- Taxpayer’s history of income or losses with respect to the activity: A history of substantial gambling losses may indicate that the taxpayer did not conduct the gambling activities for profit.
- Amount of occasional profits, if any, which are earned
- Financial status of the taxpayer: If a taxpayer has substantial income from non-gambling activities, it may indicate that the taxpayer does not engage in gambling for profit. Gambling must be the taxpayer’s primary source of livelihood.
- Elements of personal pleasure or recreation: Since gambling at a casino is commonly understood to be an amusement, a taxpayer has to show there is no pleasure in gambling (for example, no friends or family members accompanied the taxpayer).
The Supreme Court ruled in Groetzinger that an individual could be in the trade or business of gambling (a professional gambler) if he pursued gambling:
- Full-time
- In good faith
- With regularity
- As a livelihood rather than as a hobby
Professional Gambler Tax Deductions
Professional gamblers can deduct their ordinary and necessary business expenses, in addition to their wagering losses, on Schedule C. However, wagering losses cannot exceed gambling winnings. Any excess gambling losses over gambling winnings cannot be carried forward or carried back to offset gambling winnings from other tax years. This is a significant benefit for the professional gambler tax return. A few common professional gambling tax deductions include:
- Subscriptions to gambling magazines and newspapers
- Travel and meal costs during tournaments
- Legal and professional fees
Self-Employment Taxes For Professional Gamblers
Since gambling winnings are normally considered miscellaneous income for casual gamblers, they are not subject to self-employment tax. However, professional gamblers do incur self-employment tax on a gambler tax return.
For additional information, see
https://www.irs.gov/pub/irs-utl/am2008013.pdf
