Re: Implications of Paying Poker Taxes This Way?
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im still curious as to which is cheaper: declaring the lump net sum or declaring wins and itemizing losses. ive heard both.
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Declaring your net win as a lump sum income can pretty much never be worse than properly declaring your winnings and itemizing deductions. But the proper method can be far worse than the lump sum method.
Take my taxes this year (numbers are made up, but represent what happened pretty effectively):
Sum of winnings: $15K
Sum of losses: $5K
Net win: $10K
Tax rate -- 25%
In the lump sum method, I would have owed $1250 in Federal taxes. But using the proper method pushed me above the threshold where education expenses are fully deductible. So I ended up losing a chunk of my deductions for my wife's tuition. As a result, we ended up owing around $1800 in taxes due to my poker play.
Filing properly increased our tax bill by roughly $550 over the lump sum method. But it protects us in case of an audit...
Acme
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