Is rakeback taxable?

[jman220]

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...The $2500 you got back from the painter resulted in you gaining no net profit, that was $2500 that you had already paid taxes on when you made it...

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i'm open-minded and willing to listen to what you have to say. Just explain to me why it is that the above quote applies to monies you pay to a painter, but NOT monies you pay to a poker site. Either way, it's money that you've already paid taxes on, "when you made it", as you say.

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Thats exactly why you're wrong, you didn't pay taxes on the rakeback money. I'll restate my earlier example, and the example that chris stated. You play a session of poker, You Make $10,000, however $2,500 goes to rake, so you only have a profit of $7,500. So now you are only paying taxes ont he $7,500 profit, NOT the $2,500 rake. Now, you get $1,000 of that rake back. You never paid taxes on it, because you counted it as part of your losses when you were figuring your profit out in the first place. You must either, 1. Pay taxes on the rakeback as income you are recieveing right now, or 2. Not deduct the rake that you know you will get back from the profits you made in the first place. Either way, you are paying taxes on it. IF rake is just money that you are paying to poker sites for a service, then you don't get to deduct that from your income. If rake is a business expense and you get to deduct it from your income, then you can't deduct the part of it that you get back.

I don't think there are any more ways that I can say this, I appreciate that you are willing to listen, but if you are not paying tax on your rakeback, in either of hte two ways I have discussed, then you are breaking the law, which of course is fine to do, but at your own risk. Advising others on these boards though that rakeback is not taxable, which could cause them to break the law by relying on your advice, is no good. I am not yet a full fledged attorney, I do have about 6 more months of law school, and I don't like tooting my own horn, but I did take tax, I got an A, I have some idea what I am talking about, and this issue isn't even close.