Poker is a popular game that has been around for centuries, played by millions of people worldwide. It is a game of skill and strategy, where players compete against each other to win money. However, with great winnings come great responsibilities, including paying taxes on your winnings.
The question of how much taxes poker players pay is a common one, and it’s important for players to understand the tax laws surrounding their earnings. In this article, we’ll take a closer look at the various taxes that poker players may have to pay and how they can go about doing so.
Firstly, it’s essential to note that poker winnings are considered taxable income by the IRS (Internal Revenue Service). This means that any money you win from playing poker must be reported on your tax return. The amount of tax you’ll have to pay will depend on several factors, including your total income and the state in which you reside.
If you’re a professional poker player who earns a substantial income from playing the game, then you’ll likely fall under the category of self-employed individuals. As such, you’ll need to pay self-employment tax in addition to regular income tax. This can be quite significant as self-employment tax is currently set at 15.3% of your net earnings.
Another factor that affects how much taxes poker players pay is their residency status. Non-US residents who earn money from playing poker in the US are subject to a withholding tax of 30% on their winnings. However, if there is a treaty between their country and the US that reduces or eliminates this withholding tax, then they can submit Form W-8BEN with their gambling establishment to claim the reduced rate or exemption.
For US residents, state taxes also come into play when considering how much taxes they will pay on their poker winnings. Each state has its own laws regarding gambling earnings and taxation rates vary widely across states.
For example, Nevada has no state income tax, meaning that poker players who live and play there are only subject to federal income tax. In contrast, California has a state income tax rate of up to 13.3%, which can add a significant amount to the overall tax bill.
It’s important to note that while poker winnings are taxable, losses can be deducted from your taxes as well. If you’re a professional poker player, you can deduct gambling losses up to the amount of your winnings as business expenses on Schedule C of your tax return. However, if you’re not a professional player, you can only deduct gambling losses if you itemize deductions and have winnings to offset them.
In conclusion, the question of how much taxes poker players pay is a complex one with several factors to consider. Professional players who earn significant income from playing poker will be subject to self-employment tax in addition to regular income tax. Non-US residents will also be subject to withholding tax on their winnings unless they qualify for reduced rates or exemptions under treaty provisions.
State taxes also come into play when considering how much taxes poker players pay, with rates varying widely across states. While winnings are taxable, losses can be deducted from taxes as well. It’s important for all poker players to keep track of their earnings and losses and consult with a qualified tax professional when it comes time to file their returns.
