Handling taxes on poker winnings can be a little tricky but if you do it with proper planning and record-keeping, you can minimize tax liabilities and avoid troubles with authorities. Here is how professional poker players handle taxes and stay compliant.
Reporting and Record-Keeping
All poker winnings, be it online and or live winnings are taxable. No matter whether you win from cash games, live events or online events, you need to pay taxes on your winnings. Professional poker players report all their winnings and losses, treating all their activities as a business. This allows for the deduction of essential business expenses such as travels, meals, requirements for poker activities and office you use for poker activity.
Professional poker players keep a proper record of winnings, losses, platform fees, buy-ins, re-entries, add-ons, and everything else, using spreadsheets or poker tracking apps. They keep a daily log of their activities and related expenses and also keep all the receipts as a proof in cases where their claims are questioned in an audit. The good thing is that they keep the money for taxes separate from bankroll and spending money. They consult tax processional and file taxes without any fail.
Deductible Expenses – What You Can Deduct ?
One of the major perks of being classified as a professional poker player is that you can deduct some legitimate expenses from your taxable income and most professional poker players especially in the UK take advantage of this. Here is what you can deduct or claim from your taxable income.
· Tournament Fees – Entry fees or re-entries for live and online events.
· Travel Costs – Flights, trains, and other travel expenses for poker trips.
· Accommodation & Meals – Hotel stays for live tournaments and meals during poker travel.
· Training & Software – Poker coaching, training sites, tracking software, and solvers.
· Equipment – Computers, monitors, ergonomic chairs, and other tools for online play
Tournament Winnings & Sponsorship Deals
Professional poker players keep records of their tournament winnings and sponsorship payments from the brands. If you are playing tournaments and winning constantly, these winnings may be taxable. Similarly, payments you get via sponsorships are taxable self-employed income, so keep a record.
Common Mistakes Some Poker Professionals Make
Record-keeping is essential to avoid troubles with tax authorities. Some poker professionals fail to keep a log of their activities, which may lead to tax issues. Make sure to keep a log of your activities to stay compliant.
Another issue is that many players ignore online income. Even if your winnings come from international platforms, they may still be taxable. So, never-ever ignore your income or wins from online poker to stay safe.
Do not mix personal and business expenses as only poker-related expenses are deductible, which you can deduct and claim from taxable income.
Tax Checklist For Poker Professionals
It is important for every poker player to plan ahead for taxes to stay compliant and avoid any troubles. Here is a poker player’s checklist.
Establishing Your Tax Location
Different states, especially in the US have different tax rules for paying taxes on your poker winnings, so make sure to check your location.
Keeping Track of Profits And Losses
Keeping record of results is essential. Keep a track of everything like expenses, profits, losses and deductions, using tracking apps like PokerTracker, Holdem Manager, or Poker Stack to avoid troubles.
Keeping All Receipts
Proving what you can is an essential point to remember. Make sure to keep all the receipts to prove your expenses such as tournament entry fees, travel expenses, coaching fees and other expenses to be on safer side.
Filing Your Tax Return on Time
Keep checking when the tax return is due in your region or country. This is because there are penalties for late payments, so keep in mind when and where you need to file your tax return to file return before the deadline.
Consulting a Poker Tax Professional
Consulting a poker tax professional is highly recommended for you as determining your due amount is very complex and you really need help when in doubt. There should be no shame in seeking tax return help.
Disclaimer
The information and advice in this article is only for information purposes and should not replace the professional tax help. There are different rules for taxes in different regions and countries and they keep changing from time to time. So, consult a specialist for professional tax help.
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