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October 22, 2019 - Business News > Information Technology
How does tax work for aspiring professional poker players?

Caption: Which countries insist that tax is paid on poker winnings?

The tax rules differ for professional poker players depending on what part of the world you live in. Some countries deem poker earnings to be a taxable income, while others deem them a form of gambling and are therefore untaxable. In the U.S., the Tax Cuts and Jobs Act (TCJA) 2018 introduced several measures that affect current professional poker players and are well worth knowing about if you are thinking of turning pro yourself.

U.S. legislation states that all winnings derived from gambling – including poker – must be reported to the Internal Revenue Service (IRS). Professional poker players must submit their poker earnings on Schedule C of the W-2G Form. This section denotes the profit and loss made by a business and enables poker-playing taxpayers to reduce their income by offsetting it against the losses incurred from playing.

There are trackable apps out there that can monitor your monthly wins and losses. Any current poker professional will tell you of the importance of planning ahead. Don't just keep all expenses receipts from poker trips and tournaments, be sure to set aside the taxes you will owe from your poker bankroll and disposable income. This will ensure you can meet your tax obligations without it affecting your everyday lifestyle, whilst having provable income that enables you to buy and sell homes for you and your family.

In the U.S., budding poker players weighing up the pros and cons of going professional should also consider that they will be subject to a “self-employment tax” if they file their annual income as a professional gambler. This equates to 15.3% of your net earnings, which is far from an insignificant sum of money. Of course, professional poker pros are free to seek professional help from accountants that may be able to undergo some “creative” work with the numbers.If you are thinking of becoming a serious poker player online, you'll need to select the best poker rooms that offer the largest player base and bonus packages to give you more bang for your buck. This includes bonus funds that can be unlocked by playing a specified number of poker hands or generating a set amount of rake at the poker tables.

At the other end of the spectrum, poker players thinking of going professional in the UK have complete flexibility in terms of their earnings. In 2002, the Labour-led Government opted to scrap all taxes on gambling earnings. However, some British poker professionals choose to register as self-employed with HM Revenue and Customs (HMRC). This enables them to voluntarily pay Class 2 and Class 4 National Insurance contributions (NICs) that ensures they can receive their state pension upon retirement.
British poker enthusiasts may be wondering what the situation is with winnings earnt when playing poker in the U.S., like in Las Vegas for example.

Fortunately, an agreement between the U.S. and UK governments means that these winnings are subject to the UK's own tax laws, so not a penny is owed in tax for major poker wins, despite having to report this figure to the IRS in the U.S.

Many other countries around the world allow poker pros to play tax-free. This includes players based in Australia, Canada and Italy, who are also largely spared from paying any tax on their poker winnings.


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