Professional gamblers can offset their losses from gambling against their gambling winnings. They can also deduct their other gambling expenses. Non-professionals (those not engaged in the trade or business of gambling) are limited in deducting their losses against gains as miscellaneous itemized deductions.
In a recent Tax Court decision, the taxpayer was employed full time by the Port Authorities of New York and New Jersey. He did not have a permanent home – instead he kept his belongings in a storage locker. After work, he would drive 125 miles to Atlantic City and stay overnight at casino hotels and gamble. He also gambled elsewhere.
Even though he did this all the time, the Tax Court did not find him to be a professional gambler In making its determination, it reviewed various factors under Code Section 183 that determines whether there is a true profit objective (a requirement for trade or business status) and found that objective lacking. These factors included:
a. He did not carry on the activity in a businesslike manner, including maintaining complete and accurate books and records;
b. He did not adjust his system or attempt to improve profitability by modifying his gambling methods;
c. He did not have, nor develop, any material level of expertise;
d. He had no history of success in any business activities (other than his unrelated day job);
e. He had substantial income from sources other than his gambling;
f. The taxpayer testified that he enjoyed gambling – elements of personal pleasure or recreation is a factor against trade or business status.
Boneparte, TC Memo 2015-128