5 ms·

In the article, she is quoted as saying that winnings from poker can be taxed at 60%. But I Googled it and the first few sites that I clicked on say more like 2

In the article, she is quoted as saying that winnings from poker can be taxed at 60%. But I Googled it and the first few sites that I clicked on say more like 25%. What am I missing?

misterprime 8y ago
Perhaps it's adding local, state, federal, and sales tax altogether? I don't know.
- deleted 8y ago
  [deleted]
baking 8y ago
Maybe European tournaments?
exclusiv 8y ago
I didn't follow that either. Wouldn't it just be ordinary income?
splonk 8y ago
Depending on whether you're filing as a professional or not, you may be paying self-employment tax. But in general, gambling winnings of that nature (big tournament scores) are pretty likely to put you in a high tax bracket and/or trigger AMT. You can deduct losses but it's a bit of a fight with the IRS every year, since they have records of every time you've won $1200 or more, but no records of every time you've lost $10k entering a tournament and not cashing.
- baking 8y ago
  If you fail to keep a receipt for a $10k entry fee I think that's on you. Edit: I think you can't carry over losses from prior years, so if you lose money one year and make money the next, your taxes on your net earnings can be higher. Rule of thumb for professional poker players: If you don't have a profitable tax year, it is time to quit.
cjlars 8y ago
Professional gamblers are supposed to pay self employment tax, which is 15.3% (half is deductible), and then all ordinary income taxes. So that's a top federal rate of 37%, plus -- she's presumably a New York City resident -- another 8.82% at the top rate for NY and 3.82% for NYC. That's about 65% gross, then once you factor in the deduction... about a 60% net marginal tax rate. So she's not wrong, but she'd only be hitting those numbers if she won a really big tournament or two. Edit: I forgot that the self employment tax phases out at ~$120k labor income, so she'd need a lot of investment income (or a high earning spouse) to pay both the top marginal income tax rates and the and 15% employment tax.
- RyanRies 8y ago
  Dear god... that means that the government will win more from your poker playing than you _ever_ will!
  - drjesusphd 8y ago
    So? Government policy should incentivize constructive industries.
    - topmonk 8y ago
      This tax rate is for general work when self employed. It's not specific to gambling.
      - baking 8y ago
        Honestly, it is for ordinary wages also. The self-employment tax is basically the same as the employee and employer portions of the FICA taxes. (I think the only difference is that the self-employment tax basis is the before tax income while the wages tax basis is after the employer portion has already been paid.)
  - lwhalen 8y ago
    "And this is how Republicans are made...." :-D

In the article, she is quoted as saying that winnings from poker can be taxed at 60%. But I Googled it and the first few sites that I clicked on say more like 25%. What am I missing?

misterprime 8y ago

Perhaps it's adding local, state, federal, and sales tax altogether? I don't know.

deleted 8y ago
[deleted]

baking 8y ago

Maybe European tournaments?

exclusiv 8y ago

I didn't follow that either. Wouldn't it just be ordinary income?

splonk 8y ago

Depending on whether you're filing as a professional or not, you may be paying self-employment tax. But in general, gambling winnings of that nature (big tournament scores) are pretty likely to put you in a high tax bracket and/or trigger AMT. You can deduct losses but it's a bit of a fight with the IRS every year, since they have records of every time you've won $1200 or more, but no records of every time you've lost $10k entering a tournament and not cashing.

baking 8y ago
If you fail to keep a receipt for a $10k entry fee I think that's on you. Edit: I think you can't carry over losses from prior years, so if you lose money one year and make money the next, your taxes on your net earnings can be higher. Rule of thumb for professional poker players: If you don't have a profitable tax year, it is time to quit.

cjlars 8y ago

Professional gamblers are supposed to pay self employment tax, which is 15.3% (half is deductible), and then all ordinary income taxes. So that's a top federal rate of 37%, plus -- she's presumably a New York City resident -- another 8.82% at the top rate for NY and 3.82% for NYC. That's about 65% gross, then once you factor in the deduction... about a 60% net marginal tax rate. So she's not wrong, but she'd only be hitting those numbers if she won a really big tournament or two. Edit: I forgot that the self employment tax phases out at ~$120k labor income, so she'd need a lot of investment income (or a high earning spouse) to pay both the top marginal income tax rates and the and 15% employment tax.

RyanRies 8y ago
Dear god... that means that the government will win more from your poker playing than you _ever_ will!
- drjesusphd 8y ago
  So? Government policy should incentivize constructive industries.
  - topmonk 8y ago
    This tax rate is for general work when self employed. It's not specific to gambling.
    - baking 8y ago
      Honestly, it is for ordinary wages also. The self-employment tax is basically the same as the employee and employer portions of the FICA taxes. (I think the only difference is that the self-employment tax basis is the before tax income while the wages tax basis is after the employer portion has already been paid.)
- lwhalen 8y ago
  "And this is how Republicans are made...." :-D