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New tax puts hurt on poker players
They say death and taxes are the only certainties in life and that statement certainly rings true in poker. As of March 8, 2008 poker players will take another hit from the government.
Under a new tax, proposed to go into effect on that date, players will know exactly how much of the prize they will be receiving. Casinos and cardrooms will start withholding 25% from any cash win over $5,000.
For example, if a player wins $10,000 in a tournament, $2,500 of that will be held by the government until the player files his tax return. At that point it will be decided if the player gets any of the money back or will have to pay more.
The new tax code took some cues from an earlier court ruling that stated tournament poker is not a skillful competition and should be considered gambling.
The law is nothing new but getting the casinos to withhold the 25% is a novel way of enforcing it.
Because of the new ruling poker players will likely be even more tempted to try their hands at online poker, which has no such deduction because it is not officially regulated. Offshore casinos will also not be affected by the tax.
The U.S. tax strikes a sharp contrast to the Canadian tax code under which only professional poker players are taxed by the government. Recreational players keep their winnings untouched although there have been rumblings that the Canadian government will change that in the future.
Most poker guides recommend keeping a complete record of both your winnings and losses while playing poker.
There have been several attempts to legalize, regulate and tax online poker including Barney Frank's IGREA (Internet Gambling Regulation and Enforcement Act) and Jim McDermott's IGRTEA (Internet Gambling Regulation and Taxation Enforcement Act).