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Ask the Slot Expert: How do you calculate win on slot machines and table games?

12 February 2020

Question: I am wondering if you can clarify the IRS rules on gaming deductions. I have been audited for 2016, in which I claimed to be a professional gambler on my taxes. I have an EIN number.

My IRS auditor says I can't claim mileage from my home to the casino because casino gaming is considered a form of entertainment.

My tax accountant and I both felt it is a legal deduction, so we appealed. I was given a new auditor. He said it was a legal deduction. In the end I had to pay an $80 penalty because I didn't file the proper paperwork.

How can the average person know how to file if the IRS can't agree on the rules?

Answer: Welcome to the world of filing as a professional gambler, where the rules are vague and incomplete so we depend on IRS opinions, which are sometimes contradictory.

You didn't say where you are located. I think there's a difference between filing in Nevada and filing in other states. Nevada has had legalized gambling for 80+ years, so the tax preparers and IRS officials are familiar with the rules. Outside of Nevada, though, you may have the only professional gambler's return that the preparer has prepared and the auditor has audited. They have to research what has been allowed in the past.

It seems like your first auditor missed the fact that you were filing as a professional gambler, though he might be forgiven the mistake because you also said you didn't file the proper paperwork. A recreational gambler can only deduct losses. A professional gambler can deduct expenses that other business can deduct, like mileage and subscriptions.

The things we can do to try to file a proper return are: read Jean Scott's Tax Help for Gamblers to learn what kind of records we need to keep and what expenses should be accepted as deductions; keep accurate records; and use a tax preparer who will research the latest rulings on professional gamblers.


Question: How does a casino determine how much cash it brings in each year? Our state-run casino published an income of around $30 million per month the last two years.

Answer: Every type of business has some specific accounting conventions that aren't relevant to other types of businesses. The casino industry is no different. Still, profit and loss accounting for a casino is pretty much the same as that for any other business.

You asked about cash brought in. Sales at restaurants and shops is straightforward, so let's look at the money won from slot machines and table games.

Calculating the casino's win on a slot machine is simple. Coin-in is every penny wagered on a slot machine regardless of source and coin-out is every penny paid out by a machine, either paid to the credit meter or hand paid. The casino's net win from the machine is Coin-in - Coin-out.

That formula worked well for the first 70 years of slot machines, but then casinos introduced free play that could be downloaded to a machine. No more waiting in line to exchange a coupon for a half-roll of quarters.

Downloaded free play is not money put into a machine, so it has to be deducted in the updated formula, Coin-in - Free-Play - Coin-out.

Calculating the win on a table game is more difficult than on a slot machine because each table has its own bank -- the chip rack. A simple formula for table win is: Drop - Chips Missing. Drop is simply the total amount of money in the table's drop box. To calculate Chips Missing, we have to do an inventory on the chip rack. Chips Missing is: Starting Inventory + Fills - Ending Inventory.

Let's look at an example. Say I sit down at a blackjack table. I quickly count that there is $10,000 in the chip rack. I buy in for $100. My c-note goes into the drop box. I lose $10 and walk away with $90 in chips.

To find the table win, let's start with the chip rack inventory. The rack started with $10,000 and now has $9,910. (I received $100 in chips from my buy-in and lost $10 back.) Chips Missing is $10,000 - $9,910 = $90.

There's $100 in the drop box, so the table win is $100 - $90 = $10.

Now let's say I just walked up and bet $10 that I had in my pocket. Chips Missing is a negative number because the ending inventory is greater than the starting inventory ($10,000 - $10,010 = -$10). The drop is 0, so table win is 0 - (-$10) = $10.

If you're interested in learning more about casino accounting, I frequently refer to Casino Operations Management by Kilby and Fox. Note that it hasn't been updated in a while so the slot chapters still refer to hoppers.

John Robison
John Robison is an expert on slot machines and how to play them. John is a slot and video poker columnist and has written for many of gaming’s leading publications. He holds a master's degree in computer science from the prestigious Stevens Institute of Technology.

You may hear John give his slot and video poker tips live on The Good Times Show, hosted by Rudi Schiffer and Mike Schiffer, which is broadcast from Memphis on KXIQ 1180AM Friday afternoon from from 2PM to 5PM Central Time. John is on the show from 4:30 to 5. You can listen to archives of the show on the web anytime.

Books by John Robison:

The Slot Expert's Guide to Playing Slots
John Robison
John Robison is an expert on slot machines and how to play them. John is a slot and video poker columnist and has written for many of gaming’s leading publications. He holds a master's degree in computer science from the prestigious Stevens Institute of Technology.

You may hear John give his slot and video poker tips live on The Good Times Show, hosted by Rudi Schiffer and Mike Schiffer, which is broadcast from Memphis on KXIQ 1180AM Friday afternoon from from 2PM to 5PM Central Time. John is on the show from 4:30 to 5. You can listen to archives of the show on the web anytime.

Books by John Robison:

The Slot Expert's Guide to Playing Slots