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Comment by lotsofpulp | Hacker News Reader

Why is paying income tax on income from gambling painful?

It's basically a case of heads you win 60%, tails you lose 100%. In almost all cases the taxes that you're required to pay on winnings is much more than the writeoff that you can get from losing, e.g. https://turbotax.intuit.com/tax-tips/jobs-and-career/can-you...

I cannot imagine how it would benefit society to provide full deduction of gambling losses, and can conceive of avenues for corruption to expand if it were offered.

That's true but the complaint that gamblers have (at least those who pay taxes in the US), if you win a big jackpot in January, say $10,000, and over the course of the year you lose all $10,000 so that you're even, you still have to pay tax on the jackpot (as normal income) but can't reduce the amount by the subsequent losses. Yes there is some ability to deduct some losses as expenses but it's not an even trade. It's hard to win at gambling, much harder the way the US tax code is structured. Keep in mind that many countries don't tax gambling winnings at all, so many people feel the US rules are unfair from the start.

Too late to edit my own comment but technically it is incorrect. If you keep meticulous records of the offsetting losses, the IRS may allow you to claim zero gambling income in that fiscal year and relieve you of having to pay tax on income.

What I stated above is true across fiscal years. If you win a $10,000 jackpot on December 31, and lose all $10,000 on January 1 (or at any point over the next 12 months), the above comment is true. You don't get to reduce your income in the next year by the $10,000 of losses, or edit the previous year's return, or offset the earlier win in any way.

If I’m at the point, as a hobbyist sports gambler of keeping meticulously accurate records, I’m no longer a hobbyist.

I could shorten that to “why is paying income tax painful” but if you don’t understand taxes, it’s like a micro version of winning the lottery, you don’t get all of it.

Or were you just being a prick?

> I could shorten that to “why is paying income tax painful

Yes, that was my point.

Welp either I’m dense or you didn’t make a point. We can go with the former.

Cheers.

Sorry, I just meant the original comment sounded like there was something especially onerous about income taxes on gambling winnings compared to tax on other types of income.

I dunno, it’s hard to describe. Imagine $10,000 on $47 and realizing that half that money never existed. I don’t mind paying the taxes on it, but claiming gambling winnings basically defeats any sensible financial tax strategy.

I think I’m the only person I know who claims them. I’m about to give it up because I never needed the money, it’s just fun to beat the house. The taxes really do suck.

You’re right, this website educated me on some of the inconsistencies/drawbacks compared to other income:

https://www.lhd.com/the-edge/if-you-are-a-recreational-gambl...

As a US taxpayer, if you win $10,000 on one day and then lose $10,000 the next day gambling, then you have to report $10,000 net gambling income for the year and pay taxes on that - even though you actually made zero.

Yes, this website educated me on some of the inconsistencies/drawbacks compared to other income:

https://www.lhd.com/the-edge/if-you-are-a-recreational-gambl...

Not true if you itemize.

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