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Ask the Slot Expert: Slots and taxes29 April 2015
Thanks for the kind words about my column.
There's no good reason for not featuring black people on some slot games.
One game that really shows a missed opportunity for diversity is Rich Life by Aruze Gaming, a Japanese company that is increasing its presence in the United States. My cousin enjoys playing this machine, so I frequently get roped into playing along with her.
When you start playing, you have to pick a character that will represent you on the game board on the big screen above the machines. Your choices are man or woman, blond hair with blue eyes or dark hair with brown eyes.
I just realized that I always pick the option that looks most like me, the man with blond hair and blue eyes, which is pretty close except that the blond hair I had as a little kid turned brown as I got older - and then fell out! With a little extra programming and graphics work, Aruze could have given more choices so more people could pick characters that resembled them.
In Tax Help for Gamblers, my go-to guide for taxes and gambling, Jean Scott and Marissa Chien list these things that are affected by AGI: Social Security, Medicare premiums, IRA contributions, mortgage deductions, real estate taxes, charitable contributions, employee business expenses, medical expense deductions, rental real estate deductions, casualty loss deductions, child tax credit, earned income credit, DMV taxes, points on a home loan, investment interest, miscellaneous itemized deductions subject to the 2 percent limit, lifetime learning credit, Hope credit, retirement savings contribution credit, adoption credit and AMT. And, as you point out, ACA subsidies, which went into effect after the book was published.
I'm all in favor of people who can afford something (like health insurance) paying more so others who aren't as fortunate can afford that something too. The employee contribution to the health insurance at my current employer is tiered based on the employee's salary, with more highly compensated employees paying more than other employees. Although I'm not keen on having to pay more for my insurance than some other people, I think it makes a lot of sense.
I wouldn't have a problem with "winning" gamblers losing some benefits because of their increased AGI but, as we've pointed out many times in this discussion, a win reported on your Other Income line may really be only one side of a ledger that actually shows an overall loss.
Your suggestion is one solution - report your net win in Other Income. That's the way Schedule C and E income/loss are reported. Your solution makes the year one long session, a concept that the IRS does not accept, as we'll see in the next letter.
Thanks for the kind words about my columns.
As I said above, my go-to guide for gambling-related tax issues is Tax Help for Gamblers. In it, Jean and Marissa also state that the key to reporting is what you define as a session. You report the total of your winning sessions on Form 1040 and the total of your losing sessions on Schedule A.
A year is too long for a session, so that rules out just reporting your net win on Form 1040. They also say counting a multi-day trip as one session would be hard to defend to an IRS auditor. Counting each machine as a session goes too far in the other direction. Can you imagine keeping track of how much you win or lose on each machine? I've done it and it is not only burdensome, but also error prone - mainly because of my poor handwriting.
I settled on breaking the day into three dayparts: morning, afternoon and evening. I use each daypart as one session and note my win/loss for each daypart. Switching casinos always starts a new session even if it is still, say, the afternoon.
I find it interesting that the Safe Harbor Method notice you cited says that a calendar day is acceptable for a session.
Now, I don't see the logic behind having to split my play from 10PM to 1AM into two sessions - it seems like one session to me. But Jean and Marissa say that whatever you define as a session, it should be consistent, reasonable and practical. If you're going to define a session as a calendar day, then you must be consistent and start a new session when the clock strikes 12 - Oh, wait! There are no clocks in the casino, let alone clock chimes or bells.
I'm still going to continue breaking my day into three parts and noting my results for each part. I can always combine them later on into daily totals.
Send your slot and video poker questions to John Robison, Slot Expert™, at email@example.com. Because of the volume of mail I receive, I regret that I can't reply to every question.
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