Skip to main content

Gambling Winnings & Losses: Professional gambler versus amateur gambler?

Gambling, tax gambling rules, gambling income, gambling winnings, gambling losses, reporting gambling income
The IRS categorizes gamblers into two types: amateur gambler and professional gamblers. The category distinction is important because the two types of gamblers face different rules and reporting methods. For specific reporting rules for both amateur gamblers and professional gamblers, please follow the link below.

 Link: How to report gambling winnings and losses?

 Because of the different tax rules and reporting methods, the IRS aggressively challenges the gambling status classification of taxpayers. Further, the burden is on the taxpayer to prove his or her gambling status. This is a difficult situation because gambling classification is based on facts and circumstances, which may be argued either way. Below, I will detail the general rules to help you determine if you meet the requirements of a professional gambler or an amateur gambler.


Professional Gambler

What constitutes a professional gambler?

Groetzinger, 480 U.S. 23 (1987), a Supreme Court case, established the professional gambler status qualifications. Relating to the qualifications of a professional gambler, the Supreme Court stated: If one's gambling activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby, it is a trade or business. Additionally, you should utilize Reg. Sec. 1.183-2 to help determine your intent to make profit. The regulation section utilizes a 9 factor test to determine if your activity meets the criteria of a business or a hobby.

Amateur Gambler

What constitutes an amateur gambler?

Applying the Groetzinger ruling and Reg. Sec. 1.183-2 should help you determine your status as a gambler. Remember that the categorization is based on facts and circumstances, and so, apply your specific facts to the stated guidance. If you do not meet the criteria, it is more likely than not that you fail to qualify as a professional gambler. Most people will qualify as amateur gamblers.

In conclusion

It is important to know the difference between a casual gambler and a professional gambler. Amateur gamblers and professional gamblers face different reporting methods and tax rules. The burden is on you to proof your status as a gambler. Follow the guidance from the stated court case and regulation section to help you determine your gambling category.

Please share with others to help them determine if they meet the requirements of a professional gambler or an amateur gambler.

Please comment any questions or concerns below.

Disclaimer
Textbook Tax does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.
Labels:

Comments

  1. maxbook88June 28, 2021 at 9:17 PM

    I liked your work and the way in which you have shared this article here about online bet Singapore It is a beneficial and helpful article for us. Thanks for sharing an article like this.

    ReplyDelete
  2. picksmadeeasyJuly 17, 2021 at 4:02 AM

    I appreciate the work and effort that went into this article. This paragraph provides you with a clear picture. Without a question, it is an insightful piece that may assist us in expanding our understanding. Ncaa Picks Against The Spread In USA

    ReplyDelete
  3. 3WESeptember 23, 2021 at 8:42 PM

    You have shared a lot of information in this article about latest casinos playstar slot Malaysia . I would like to express my gratitude to everyone who contributed to this useful article. Keep posting.

    ReplyDelete
  4. calvinewersOctober 22, 2021 at 5:45 AM

    I was reading some of your content on this website and I conceive this internet site is really informative ! Keep on putting up. Online Poker

    ReplyDelete
  5. HuatytwoJanuary 19, 2022 at 4:26 AM

    Hello i think u need to other website. buyhuay.info

    ReplyDelete
  6. onlinegamblingMarch 14, 2022 at 8:26 AM

    I generally check this kind of article and I found your article which is related to my interest. Genuinely it is good and instructive information,Casino Slot Games Malaysia Thankful to you for sharing an article like this.

    ReplyDelete
  7. 3wesgMarch 14, 2022 at 3:00 PM

    A very delightful article that you have shared here. Your blog is a valuable and engaging article for us, and also I will share it with my companions who need this info,Gambling Website Singapore Thankful to you for sharing an article like this.

    ReplyDelete
  8. 8nplayMarch 24, 2022 at 1:10 PM

    Excellent post. I really enjoy reading and also appreciate your work. This concept is a good way to enhance knowledge. Keep sharing this kind of articles, Online Gambling Singapore Thank you.

    ReplyDelete
  9. magiclottoJuly 1, 2022 at 1:26 PM

    You have done good work by publishing this article here.Instant Win Lottery Games Online I found this article too much informative, and also it is beneficial to enhance our knowledge. Grateful to you for sharing an article like this.

    ReplyDelete

Post a Comment

Popular posts from this blog

Gambling Winnings & Losses: How to report gambling income and losses

People love to gamble.  During the past NFL Super Bowl (2019),  gamblers wagered approximately $146 million in Nevada’s sports books, which fell short of the record set the year before of $159 million. The gambling industry continues to grow as U.S. legislation becomes less restrictive relating to the gambling industry.  Because of the size of the gambling market, the IRS set forth guidance to control the tax treatment of gambling winnings and losses. I will discuss income and losses, record keeping, reporting forms, and special rules. If you participate in gambling activities, it is important to know the unique personal tax rules. The term 'gambling' applies to a wide range of activities, including: sports betting, casino games, lotteries, etc. You will need to follow the established gambling tax rules when reporting winnings and losses from gambling activities. Related Posts IRA Income: Must know tax rules relating to your IRA Are your income items taxable?...
144 comments
Read more

Cryptocurrency Taxation: How does the U.S. tax cryptocurrency? - Textbook Tax

The cryptocurrency market continues to rise in popularity in the U.S. and throughout the world. The decentralized finance ("Defi") sector has seen massive growth. Additionally, ease of access has increased as new and established companies offer crypto services and exchanges. As more and more individuals and institutions adopt cryptocurrency, it becomes more important for people to understand the tax laws and regulations governing the cryptocurrency industry. It is important to note that each country views and regulates virtual currency differently.  The scope of this article covers the crypto tax laws in the United States.  T he IRS defines virtual currencies as  digital representations of value that function as mediums of exchange, units of account, and/or stores of value. Further, t he U.S. views crypto as property subject to capital gains and losses for US federal tax purposes. Based on its designation as property, i n general, there are four taxable events when d...
18 comments
Read more

20 Tips & Tricks for Studying for the CPA Exam

For those on the way to becoming a certified public accountant, you now know it is a long and difficult journey. For those just beginning, good luck! The most difficult and time-consuming task is passing the CPA Exam. CPA candidates must spend hundreds of hours preparing for all four sections of the CPA. Each CPA section represents an entirely different topic, creating a daunting task for anyone looking to start studying for the CPA exam. I passed all four sections of the CPA with an average score of 91. Luckily, I did not have to retake any of the exams, which is a common occurrence as the average passing rate is around 40-50% per exam. Having personal experience dealing with the CPA exam process, I want to share valuable tips for conquering the CPA exam. I want you to feel confident and comfortable during the CPA exam process, and so, I believe the following tips will help you during the CPA exam process. Lets begin! Related Posts -  Preparing for the CPA Exam: How to St...
8 comments
Read more