As sports betting and online gambling continue to grow in popularity across the United States, tax professionals are increasingly addressing clients’ gambling-related winnings and losses. Here are some key points to consider:
1. Is a multi-day stay at a resort considered one gambling session, or should it be divided into individual days?
According to Notice 2015-21, a stay at a resort spanning multiple days cannot be treated as a single gambling session. Each session must end daily at 11:59 p.m., so a multi-day stay will need to be broken down into separate sessions.
2. Should professional gamblers use Schedule C for tax reporting, and are they subject to self-employment (SE) tax?
Professional gamblers should report their gambling income and losses using Schedule C (Form 1040), which is for reporting profit or loss from business activities. They are also subject to self-employment (SE) tax.
3. Can taxpayers combine different types of gambling activities (such as poker, slots, and craps) into a single session for tax purposes?
No, taxpayers cannot combine different gambling activities into a single session. The sessions method applies only to electronically tracked slot machine play. Other types of gambling activities must be treated separately.
4. Are professional gamblers allowed to deduct gambling losses that exceed their winnings?
No, gambling losses are limited to the amount of gambling winnings under §165(d). Even professional gamblers cannot deduct losses that exceed their winnings.
Understanding these guidelines can help ensure accurate tax reporting and compliance. For further assistance, consulting a tax professional knowledgeable in gambling-related tax issues is always a good idea. Here at Ultimate Tax Group, We can guide you through the complexities and help maximize these winnings and losses for you.
