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InterPoker
HEADLINE:
Celebrity Poker and Taxes
Author: I. Nelson Rose
BODY:
Successful actors, writers and others in the entertainment industry
share some advantages with professional gamblers when they play
poker. With success often comes self-confidence, or at least
the ability to project an image of being a winner, in control.
Celebrities are often rich. They can think of poker chips as poker
chips, and not as the cost of their dinners. The knack for thinking
of $100 chips as merely "units" or "blacks"
is essential for taking the emotion out of poker. Famous people
can also rattle others by their mere presence. A professional
actor can be as intimidating at the table as a professional poker
player.
But one unique advantage entertainment industry types share with
pro players is financial. They can take their travel and other
gaming-related expenses off their taxes. And they may even be
able to deduct their gambling losses beyond their winnings.
If you are in the top tax bracket and live in a high-tax state
like California, you have to give the state and federal governments
45 cents of every additional dollar you report. But if it cost
you a dollar in ordinary and necessary business expenses to earn
or win that extra dollar, and you are in the trade or profession
of gaming, you get to keep 100% of your winnings.
Imagine it is December 31st and you are in a poker game. You
already know you are going to have to pay a lot in taxes for the
successful year you have had so far. So, if you win $1,000 in
this game, you are going to get to keep only $550 of it. The other
$450 goes to the state and federal governments to do whatever
it is they do with our money. (Yes, I know not everyone reports
their poker winnings. But they're supposed to, so stick with me
so I can make my point).
Regular players will have to write two checks on April 15 totaling
$450. But, and this is a wonderful but, if it cost you $1,000
to get to this game and it is necessary for your business to play,
you pay nothing. You report the $1,000 winnings but then deduct
the $1,000 in expenses. (You actually may not break even, since
the poker winnings and expenses are reported on different parts
of your income tax form.)
Only those who play poker for a living can deduct these expenses.
But this includes actors who are paid to play poker in a screenplay.
Besides expenses, there is the question of lost bets. Everyone
can deduct losses up to the amount of their winnings. If you won
$10,000 at the track during the year, you can deduct up to $10,000
in losses from poker, but no more. But a person who needs to learn
how to play a poker player for a film role has to play in real
games first. So he or she may be able to deduct, say, $15,000
or $20,000 or more in poker losses. Professional players have
to show that poker is nearly a fulltime job and that they are
in a game with a reasonable expectation that they will make money.
It is possible that celebrities can deduct their poker
expenses and losses even if they don't expect to take home poker
pots. Actors usually do not keep the money they win on celebrity
poker tournaments. But isn't it important that they show their
faces on TV and, most importantly, that they don't make complete
fools of themselves?
I don't think any court would deny an actor a deduction for the
cost of a poker coach in this situation. Why should it make any
difference if the celebrity learns his lessons in a tutoring session
or in a live game?
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