Poker Taxes

Umm, this is never how it works. Deductions are there to adjust your income to your "true" income of running a business. Because you're reporting your winnings net of rake already, it would be silly to adjust it again. If you wanted to deduct rake paid, you could report your net winnings from other players (250k) + your rakeback earnings (50k) then deduct your rake expense (150k).

What you're suggesting would be akin to a company earning 1 million in revenue, and paying 500k for its expenses, leaving it with a net profit of 500k (taxable) and then claiming the 500k in expenses as a deduction.

Again, deductions are there to account for things that aren't already part of your "net" number.

T__T

My logic is a little bit off but rake should for sure be included up to the point where it cancels out taxes owed but not in excess of that.

Example:
1. Player X pays no rake and makes 250k. Player X is taxed on 250k earnings.

2. Player Y pays rake. Player Y makes 150k from poker and rakeback. Player Y pays 150k in rake fees.

I think that before you tax Player Y on his earnings of 150k those taxes should be counterbalanced by the 100k in rake paid that was not returned. If the taxes owed are not in excess of the rake paid out by the player in expenses then the government has zero right to even a single dollar of that 150k. The rake acts only to counterbalance any taxes that would be owed it certainly does not get returned over the balance of zero through a tax credit.

Reasoning:
1. Players fees to play poker
2. As a group it is always a net loss for the players because of rake
3. The government then wants to tax the earnings of the players which are a net loss - i.e. there is NO profit to tax. Which by the way makes taxing poker insulting and wrong.

On an individual basis there may be some "profit" to tax but as a whole the players lose every time. Including the rake paid and not returned via rakeback is just bringing the players back up to even par and therefore if the laws made any sense there would be no tax on the activity period. Making a player invest in what is an overall losing market because of rake and then taxing them on whatever comes out of that market is beyond insane. It makes it very difficult for someone who earns less than 200k a year in profit playing poker to make a living playing the game especially in the absence of things a normal job provides like benefits.

Pokerstars or the poker site played on is the only member of the equation that has a realistic and consistent expectation of profit. The government wants to tax player Y on his/her earnings of 150k but turns a blind eye to the 100k paid in rake that was not returned. Why should Pokerstars get to operate tax free? It is 100% wrong to tax the players while ignoring the tax revenue from the sites themselves. Rake should be 100% included in the tax report and it should counterbalance any taxes up to the break even mark but not above.

Nobody is asking to put their hand in the cookie jar here. They're asking it to be fair. If there was no rake in Poker it would be much more viable as a profession and a lot more people would be able to make money at it. The reason it's so difficult is because of the rake. If you want to put paying taxes on the net loss of the players on top of the rake that's just getting ridiculous. It becomes almost impossible for anyone with any education in the matter to suggest that Poker is an viable source of income from an economics perspective.

If the tax law doesn't work that way then it needs to change and people need to step up to the plate and fight against it. No economist worth is salt would point to a diagram where the players put in 100k, pass it around, 15k is lost to rake, 85k is awarded and then say well the players made profit here so they can be taxed. There is no profit! It's a net loss! Even with rake counterbalancing the earnings the government still should have zero right to tax it because its a net gain of exactly zero.

If you all just bend over and let the government rape you in the ass it's your own fault, but I won't do it. I will sooner get a lawyer (or become one, as might be the case if I get into Law School) and fight this shit to the death if I ever made consistent big professional earnings. In order to be taxable there has to be a legitimate expectation of earnings. There can be no such expectation under an economical model where the players as a group achieve a net loss 100% of the time. Nay!

1. If I'm a store owner and I make 100k from people buying my stuff. That's a legitimate expectation of profit.
2. If a large group of people play poker with 100k and 85k is redistributed to the players. That's a legitimate expectation of loss.

All I am saying when I say include your rake as an expense and report your rakeback as earnings is this:
1. If a large group of people play poker with 100k and 100k is redistributed to the players. There is a legitimate expectation of no gain or loss. Therefore after your rake is accounted for there should be no taxes left to pay on the earnings you did make.

On April 05 2010 16:55 Bejamin1 wrote: My logic is a little bit off but rake should for sure be included up to the point where it cancels out taxes owed but not in excess of that. Example: 1. Player X pays no rake and makes 250k. Player X is taxed on 250k earnings. 2. Player Y pays rake. Player Y makes 150k from poker and rakeback. Player Y pays 150k in rake fees. I think that before you tax Player Y on his earnings of 150k those taxes should be counterbalanced by the 100k in rake paid that was not returned. If the taxes owed are not in excess of the rake paid out by the player in expenses then the government has zero right to even a single dollar of that 150k. The rake acts only to counterbalance any taxes that would be owed it certainly does not get returned over the balance of zero through a tax credit. Reasoning: 1. Players fees to play poker 2. As a group it is always a net loss for the players because of rake 3. The government then wants to tax the earnings of the players which are a net loss - i.e. there is NO profit to tax. Which by the way makes taxing poker insulting and wrong. On an individual basis there may be some "profit" to tax but as a whole the players lose every time. Including the rake paid and not returned via rakeback is just bringing the players back up to even par and therefore if the laws made any sense there would be no tax on the activity period. Making a player invest in what is an overall losing market because of rake and then taxing them on whatever comes out of that market is beyond insane. It makes it very difficult for someone who earns less than 200k a year in profit playing poker to make a living playing the game especially in the absence of things a normal job provides like benefits. Pokerstars or the poker site played on is the only member of the equation that has a realistic and consistent expectation of profit. The government wants to tax player Y on his/her earnings of 150k but turns a blind eye to the 100k paid in rake that was not returned. Why should Pokerstars get to operate tax free? It is 100% wrong to tax the players while ignoring the tax revenue from the sites themselves. Rake should be 100% included in the tax report and it should counterbalance any taxes up to the break even mark but not above. Nobody is asking to put their hand in the cookie jar here. They're asking it to be fair. If there was no rake in Poker it would be much more viable as a profession and a lot more people would be able to make money at it. The reason it's so difficult is because of the rake. If you want to put paying taxes on the net loss of the players on top of the rake that's just getting ridiculous. It becomes almost impossible for anyone with any education in the matter to suggest that Poker is an viable source of income from an economics perspective. If the tax law doesn't work that way then it needs to change and people need to step up to the plate and fight against it. No economist worth is salt would point to a diagram where the players put in 100k, pass it around, 15k is lost to rake, 85k is awarded and then say well the players made profit here so they can be taxed. There is no profit! It's a net loss! Even with rake counterbalancing the earnings the government still should have zero right to tax it because its a net gain of exactly zero. If you all just bend over and let the government rape you in the ass it's your own fault, but I won't do it. I will sooner get a lawyer (or become one, as might be the case if I get into Law School) and fight this shit to the death if I ever made consistent big professional earnings. In order to be taxable there has to be a legitimate expectation of earnings. There can be no such expectation under an economical model where the players as a group achieve a net loss 100% of the time. Nay!

I agree with you philosophically that taxes should be lower, but this is a pretty reasonable thing for the government to ask. Every person is essentially supposed to be taxed on whatever the net gains of their labor and capital realized during the year were. Because your winnings are net of rake, it makes no sense to take it out twice.

A simple example:

I'm a lawyer. I took on one case in 2009 and won it using only my wits (no expenses), but I have to pay rent on my office. My fee for winning the case was 100k, and I had to spend 20k on rent. My taxable income is 80k either because I:

a) report 100k in income from my job and deduct 20k in expenses

or

b) report 80k income and deduct no expenses because rent is already part of that calculation

The rake you're referring to is very much like b). It is a cost of doing business, and every poker player I know counts their winnings not as "winnings from other players" but as "winnings from other players net of rake". The government isn't screwing you at all when they say you can't deduct something twice when the profit you're reporting is already representative of your actual net gain.

That said, I'd very much like to refer to myself as someone who beats nl100 for over 5ptbb but has to pay 4ptbb (or whatever it is) in expenses to FTP.

On April 05 2010 17:09 Bejamin1 wrote: Therefore after your rake is accounted for there should be no taxes left to pay on the earnings you did make.

but every report of poker earnings already accounts for rake (PTR, PT3, HEM, your cashier)