$10k tournies and taxes

[wins_pot]

It seems like people enter into tournaments with after-tax money and get paid in before-tax money. Will someone who plays in a lot of big tournaments explain how the tax reporting is done? The high variance associated with tournaments makes them especially tax disadvantaged, because gambling losses in one year cannot be used to offset gains in another year.

[Temp Hutter]

There is a real nice tax advantage if you have winnings to offset. If you are paying 40% in federal and state taxes and you have winnings in the current year, then a $10,000 buy-in is actually only costing you $6,000 because you will get $4,000 of it back the following April. It is a no brainer to enter into tournaments at the end of the year if you have winnings to offset.

You are correct that losses do not carry over from year to year. If you never win then you have larger problems than not having a tax write off for your losses.

[wins_pot]

point taken, but you will still have to pay taxes on the your winnings. you are paying .6x to enter, but you will get paid out in taxable (.6) money as well.

[drewjustdrew]

[ QUOTE ]
point taken, but you will still have to pay taxes on the your winnings. you are paying .6x to enter, but you will get paid out in taxable (.6) money as well.

[/ QUOTE ]

Valid point, but you seem to be guaranteeing yourself a win. If you are going to buy in for 10k and receive .6 of prize, you should definitely be willing to buy in for essentially 6k and receive .6 of prize.

[2ndGoat]

Corollary:
Once you get to a point in the year where you are in no danger of going negative for the year, you are playing for 40% smaller stakes than the face value, no matter what the game.

2nd