Bettors may have to pay taxes on income they never received because of a last-minute tax law that caps gamblers’ loss deductions at 90%. Professional sports bettors, who already operate on extremely thin margins, could be devastated by the change, industry experts warn.
A few phrases sneaked into the 940-page tax measure passed by Congress this week may require some gamblers to pay income taxes even after losing money.
The clause was revealed just a few days before the measure passed through the House and Senate this week, startling industry executives and raising concerns about professional sports bettors’ livelihoods. Gary Kondler, a Las Vegas-based CPA who files taxes for full-time sports bettors and poker players from all across the country, detailed a week of “absolute chaos” while answering customers’ terrified phone calls.
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Bettors who win more than they lose over the course of a year only pay taxes on their gains since, up until now, they have been able to deduct all of their betting losses from their stated income. Gamblers may only deduct 90% of their losses under the new measure, which was adopted by the House on Thursday and will soon be signed into law by President Donald Trump. However, they will still be required to pay income tax on any gains.
This means that, if they honestly record their activities, gamblers/bettors who lose money might still be liable for taxes. That situation was outlined by Russell Fox, another accountant with a gaming specialty headquartered in Nevada. According to Fox, a gambler who has $1 million in losing bets and $950,000 in winning bets would only be able to deduct $900,000 of the losses under the new bill, which would mean that they would have to pay taxes on $50,000 of “phantom income” even though they actually lost that much money.
Professional sports bettors, also referred to as “sharps” because they usually grind out gains from thin margins and risk enormous sums of money to make a career, face an existential danger from the change. Gamblers who win $1 million and lose $900,000 in a year will only be entitled to deduct $810,000 of their losses under the new measure, which means they will still pay taxes on $190,000 even though they took home $100,000.
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