BitPlayer Wrote:
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> Not the same. The capital gains rules allow you
> to use a net loss to offset other income, within
> limits.
>
> As for gambling loses, even under the prior rules,
> you could only use them to offset gambling
> winnings. You could not use net gambling losses
> to offset other income.
>
> Under the new rules, you are always required to
> pay tax on 10% of your winning wagers, even if you
> have a net gambling loss for the year.
>
> As a practical matter, I assume that most people
> don\'t report gambling winnings on wagers for which
> they do not receive a W-2G.
The post quoted above is 100% correct and the post it replies to was incorrect.
What\'s more --
1) Although it is true that nobody (virtually nobody) reports gambling winnings for which they do not receive a W-2g - that was true under a regime were the vast majority of taxpayers would not have owed any tax - it would have been a dead end for the IRS (or any finders fee types) to go after these people. In the new regime, there are two new factors that change the whole equation - (a) a large amount of people who will owe a large amount of tax and (b) a new incentive for people to force collection (see infra).
Let\'s put aside for a moment the question of whether this applies to professional gamblers, look at gross payouts at all parimutuel wagers and all sports/racebooks that are US taxpayers. We are talking about billions of dollars here -- according to AI - $10 billion handle for parimutuel and $30 billion in legal sports betting. So, looking at that handle, blending the take out between sports betting and horses - lets say that take out totals 10%. That means that these companies report to the IRS that they tendered $36 billion of reportable gambling \"winnings\" to \"winning\" bettors. Even though those gamblers as a whole by definition were losers (don\'t forget the take out), According to the IRS, ALL of those \"losers\" actually made $3.6 Billion of taxable \"winnings\".
So, under the prior regime, there was nothing in it for the IRS to go after these people for not reporting because almost everybody was a loser plus there was almost no money at the end of the road for the few who might have won. Under the new regime, EVERYBODY is now a winner AND there is at least $1 billion per year every year of collectable taxes out there to collect. Very different situation. You can say $1 billion is so small that the IRS wont do anything about. However, keep in mind, this is a sin tax and it accrues year in and year out. What stops a church from going to the IRS and pointing out all the uncollected sin taxes going on in its parish? The church can give the IRS the clear diagram on how to collect the uncollected sin taxes and the church gets a cut of anything they directed the IRS to go collect. The only thing you can do to avoid this is to either not bet, or only bet cash in person in an untraceable way (i.e. no more tracking play for rebates or benefits).
This analysis ignores new taxes that would become due as a result of the falsely inflated AGI. Gamblers\' AGIs will escalate big time due to the fact that \"winnings\" go into the AGI and losses only may be deducted after the AGI is determined.
This is a sop to churches. It gives churches a new source of revenue - they can tattle tale to the IRS for all the people in their parish not reporting their \"gambling winnings\". I predict that your total handle at your wagering platforms will become the new W-2g. Imagine if alcohol or tobacco sellers cooperated with their customers to avoid their sin taxes. This is the easiest thing to forsee. Not reporting will no longer be a way out like it was under the prior regime.
I would love to be wrong here. I wish I was wrong here. I am planning to convert all my 2026 play into contest play as a way to keep gambling while reducing my sin tax bill. One would think that betting platforms would be worried about bettors like me changing their patterns. It could be disastrous for the sport.
2) There are many other huge ridiculous complications. Arguably, this sin tax on gross cashes doesnt apply to professional gamblers - the argument runs that they use Schedule C and are allowed to net and they pay tax on their winnings. However, the tax they pay on their winnings pales in comparison to the taxes they would pay on 10% of their handle. Also, does it make sense that a person can get out of paying a sin tax by being a professional sinner? Whatsmore, under that theory, everybody is now a professional since everybody is deemed to win 10% of what they bet. It is a total mess and makes no sense whatsoever. How on earth the IRS is going to enforce this is crazy plus with the finders fees and churches looking at a new source of revenue from finders fees on getting sin taxes paid. Oy.
3) You might say I am being irrational about the church and state thing here, and I wish I was, but I would direct you to two things - current trends in caselaw on separation of church and state plus the fact that Russel Vought (the architect of all this) is devoutly religious and makes all this stuff both in business and in the supreme court a religious crusade. You may ask yourself why bother with taxing false gambling winnings. IT was a silly thing. But they did it and they did it for a reason. That reason is a drive to increase tax revenue from sinners. Again, I wish I was wrong here. Would love to be wrong here, but under the current supreme court, I fear I am correct.
4) The result of this is just incredible sadness. This is so sad I cannot believe it. What on earth merits penalizing people for how they choose their hobbies. Believe me, if this were a tax on golf course fees, the people imposing this on us would back off so fast everybody woudl get a nosebleed. One way to look at this is that we are being penalized because we choose to spend our Saturdays at the horse races instead of on the golf course.
