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Offsetting DFS Income (1 Viewer)

gambla

gambla

Footballguy
Hypothetically speaking, let's say I've won $600k net this year in DFS. If I were to go to Vegas and lose $20k on poker, sports betting, blackjack, etc., would I be able to itemize those gambling losses and offset them against my DFS winnings?

I believe that DFS is considered "hobby income" right now since its not "gambling", from a legal standpoint. Therefore, would I have $600k of DFS taxable income and $20k of gambling losses (which won't offset my DFS income)?

I am hoping that the gambling losses can be used to offset the DFS income, but want to make absolutely certain for tax reporting purposes.

Thanks in advance for any guidance!

 
my understanding is that claiming gambling losses on taxes is extremely difficult. you have to be very diligent in documentation.

 
NixonMask said:
All you have to do is argue with that IRS that your gambling loses arent gambling at all. Theyre "research" for your hobby, testing game theory and risk management. Good luck!

https://ttlc.intuit.com/questions/2701814-can-a-sweepstakes-prize-income-be-offset-by-gambling-losses
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Thanks for the link.

I'm hoping to offset the gambling losses though vs the dfs income since hobby expenses are subject to the 2% of AGI rule.

The more and more I think about it, the more I think it cannot be used to offset.....just hoping someone from past years has actually filed this way, been audited, and was still able to deduct the gambling losses vs dfs income with the IRS giving grace over it. Surely this has happened to someone on these boards! :)

 
gambla said:
NixonMask said:
All you have to do is argue with that IRS that your gambling loses arent gambling at all. Theyre "research" for your hobby, testing game theory and risk management. Good luck!

https://ttlc.intuit.com/questions/2701814-can-a-sweepstakes-prize-income-be-offset-by-gambling-losses
Click to expand...
Thanks for the link.I'm hoping to offset the gambling losses though vs the dfs income since hobby expenses are subject to the 2% of AGI rule.

The more and more I think about it, the more I think it cannot be used to offset.....just hoping someone from past years has actually filed this way, been audited, and was still able to deduct the gambling losses vs dfs income with the IRS giving grace over it. Surely this has happened to someone on these boards! :)
Click to expand...
Probably the best hope would be to convince them that it's a business, not a hobby. That's a tough row to how too though.

 
While we're on this subject, let's say I won $1000 at FD and lost $1000 at DK. FD sends me a 1099. What happens?

 
BassNBrew said:
While we're on this subject, let's say I won $1000 at FD and lost $1000 at DK. FD sends me a 1099. What happens?
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Two options I believe

#1 DFS is a not for profit activity and then you can deduct those losses if you itemize your taxes. They will be subject to the 2% AGI floor as a misc. deduction. Losses, expenses, can't offset winnings beyond reducing them to zero, can't create a net loss.

#2 DFS is a for profit activity which allows you deduct the expenses regardless of whether you itemize or not and the 2% floor is no longer an issue. If your going to attempt this you need to really look into what is required for a activity to be for profit. There are multiple factors but the key thing is that you treat it like you would a business.

 
Tennessee_ATO said:
NixonMask said:
You can get a DBA for a few bucks, put your dfs account in its name
Click to expand...
Takes a lot more than that to fulfill the IRS requirements for business vs hobby income.
Click to expand...
Agreed a DBA isn't going to mean anything to IRS when considering for profit activity vs not for profit. They are going to consider a number of factors which show you treat it like a business not that you named it like a business.

 
It's a good first step. Membership to sites like this, spend some time creating your own projections, track each contest as an ROI investment would be the steps to take. And talk to a tax lawyer too maybe if you have the time

 
NixonMask said:
It's a good first step. Membership to sites like this, spend some time creating your own projections, track each contest as an ROI investment would be the steps to take. And talk to a tax lawyer too maybe if you have the time
Click to expand...
If the amount of money you're talking about doesn't justify hiring an accountant, then it isn't worth trying to call it business income. Don't for 1 second think the IRS won't take a special interest in anyone trying to call DFS a "business enterprise".

 
I have no doubt. If even 10% of the 600k asked about was anywhere close to actual though its probably worth a consult.

 
NixonMask said:
I have no doubt. If even 10% of the 600k asked about was anywhere close to actual though its probably worth a consult.
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Absolutely. But if you call it business income, then the Vegas losses can't come off of it because that's a gambling loss and it can only offset gambling income. You also have to remember that hobby income isn't subject to self-employment tax while business income is. You need to have a lot of expenses to offset that difference.

If you made $600k (or $60k) from DFS it would probably behoove you to have your accountant run it both ways to see how much of a difference it would make on the bottom line before deciding whether it's even worth the potential IRS hassle.

 
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