Poker Taxes: How to Report Your Winnings to the IRS

All income earned from poker, from a casual home game to a high-stakes tournament, is considered taxable income by the Internal Revenue Service (IRS). This means every dollar won must be reported on your federal tax return. The requirements for reporting winnings and the opportunities for deductions depend on how your poker activities are classified.

This guide clarifies how the IRS distinguishes between amateur and professional players, outlines methods for tracking your income, details the available deductions for each player type, and explains the specific forms used for reporting. Proper adherence to these guidelines can help you avoid potential penalties and interest charges.

Professional vs. Amateur Player Status

The distinction between playing poker as a business versus a hobby is a primary factor in how you handle your taxes. The IRS does not provide a simple definition; instead, the classification is determined on a case-by-case basis, weighing several factors to ascertain a player’s primary intent. This classification dictates how you report income and what expenses you are permitted to deduct.

To determine if a taxpayer is engaged in a business, the IRS looks for a clear profit motive, using a set of nine factors to evaluate the activity. These include the manner in which the taxpayer carries on the activity, their expertise, and the time and effort expended. A player who devotes significant time to playing and studying and depends on the income from poker for their livelihood is more likely to be viewed as a professional.

An amateur or hobbyist is someone who plays poker for recreation or sport, without the primary intention of making a profit. Even if an amateur player is skilled and wins consistently, if the activity does not rise to the level of a trade or business, they are considered a hobbyist. This distinction is not about skill level but about the taxpayer’s approach and intent.

The burden of proof to be classified as a professional gambler rests with the taxpayer. Simply declaring yourself a professional is not sufficient. You must conduct your poker activities in a businesslike manner, which includes having a business plan and seeking to improve your methods of play. This classification allows for a broader range of deductions but also subjects net earnings to self-employment taxes.

Tracking and Calculating Taxable Income

Accurate record-keeping is a requirement for any poker player, regardless of their classification. The IRS requires that you maintain a diary or similar record of your gambling winnings and losses. This log is the primary source for calculating your net income and serves as evidence should the IRS question your reported figures.

The most common method for tracking poker play is the “session method.” For each distinct period of play, you should record the date, the name and address of the gambling establishment, the buy-in amount, and the cash-out amount. A session begins when you first place a wager and ends when you stop playing. For example, if you buy into a cash game for $300 and leave the table with $750, you have a session win of $450 to record in your log.

This log allows you to calculate your gross winnings over the tax year. By summing up all your winning sessions, you arrive at the total income figure you must report. You cannot simply report your net win or loss for the year as a single number, as the IRS requires the reporting of gross winnings, with losses being handled separately as a deduction.

In some instances, a poker room or casino will issue a Form W-2G, “Certain Gambling Winnings.” You will typically receive this form if your winnings from a single poker tournament are more than $5,000, reduced by the tournament buy-in. The payer is required to send a copy to both you and the IRS. However, your responsibility to report income is not limited to amounts shown on a W-2G; you must report all winnings from all sources.

Deducting Poker-Related Expenses

The ability to deduct expenses is directly tied to your status as either a hobbyist or a professional. The rules are distinct for each category, with professionals having a much wider array of deductible costs. Understanding which deductions you are eligible for is part of managing your overall tax obligation.

For amateur players, the rules are restrictive. The only deduction available to a hobbyist is for gambling losses, which can only be deducted up to the total amount of your reported gambling winnings for the year. For instance, if you have $6,000 in winnings and $8,000 in losses, you can only deduct $6,000 of your losses.

You cannot deduct the remaining $2,000 in losses against other income. To claim these losses, you must itemize your deductions on your tax return.

Professional players, who treat their poker activities as a business, can deduct all “ordinary and necessary” expenses incurred in pursuit of that business. This goes beyond simply deducting wagering losses. Common deductions include travel expenses like airfare and lodging for tournaments, a portion of meal costs while traveling, and home office expenses if a part of the home is used exclusively for the poker business.

Other deductible business expenses for professionals can include the cost of data analysis software, subscriptions to poker training sites, coaching fees, and bank fees on accounts used exclusively for poker funds. The total of all business expenses, including wagering losses, cannot exceed the total winnings for the year. This means a professional can reduce their taxable poker income to zero but cannot claim a net loss from poker to offset other income.

Reporting to the IRS

The final step is to report your income and deductions on the correct IRS forms, a process that differs for amateurs and professionals. This procedural step ensures that all your prior preparation is accurately reflected on your tax return.

Amateur players report their total gambling winnings on Schedule 1 of Form 1040, under the “Other Income” line. This figure represents your gross winnings for the year. To deduct your losses, you must itemize deductions on Schedule A. Gambling losses, up to the amount of your winnings, are reported on the “Other Itemized Deductions” line. If your total itemized deductions do not exceed the standard deduction, you will not receive a tax benefit from your gambling losses.

Professional players use a different set of forms because their activity is considered a business. All poker-related income and expenses are reported on Schedule C, “Profit or Loss from Business.” Gross receipts from poker are your income, and all ordinary and necessary expenses, including losses, are listed to arrive at a net profit, which is your taxable income from poker.

The net profit calculated on Schedule C is carried over to your main Form 1040. This amount is also subject to self-employment tax, which covers Social Security and Medicare taxes for self-employed individuals and is calculated on Schedule SE. To avoid penalties for underpayment, professionals are required to make estimated tax payments to the IRS on a quarterly basis.