Poker Players Are Freaking Out Over This. Should You?

Poker players are freaking out over the recently passed Trump Tax Bill which only allows them to deduct 90% of their gambling losses. Will this bill kill the poker industry? In this video, I break down how the tax bill will impact recreational, professional, and high stakes poker players. I close with some reasons for optimism that the poker industry can continue to thrive despite this undesired bill. You can check it out here:

How the Trump Tax Bill Will Affect You As a Poker Player (Video):

Below is a full summary of the video:

Poker Tax Bill Intro

• The poker community is currently in an uproar due to the passing of the Trump tax bill, which potentially threatens the entire gambling industry, particularly poker players, with some even suggesting that professional poker players should start looking for a new line of work.

• The Trump tax bill has introduced a new provision that allows poker players to only deduct 90% of their losses, overturning a long-standing provision in the Internal Revenue Code that permitted poker players to deduct all of their losses.

• This new provision was not part of the original version of the bill voted on by the House, but was instead added by Senator Crapo from Idaho, highlighting the potential drawbacks of voting on a large, complex bill with a single yes or no vote.

• The situation is considered fluid, and it is possible that the impact of the Trump tax bill may ultimately have no significant impact or merely be a minor annoyance.

• The purpose of this discussion is to break down the specifics of the Trump tax bill, focusing solely on the poker component of the bill, and exploring what the changes mean for those involved in the industry.

  

  
  

What The Trump Tax Bill Means for Poker Players

• Poker players report taxes by summing up all their winning days and all their losing days, then deducting their losses from their wins to pay tax on their profit over the course of the year.

• The new tax bill affects poker players by only allowing them to deduct 90% of their losses, resulting in them paying tax on phantom income that they did not actually earn, with the problem becoming bigger as their losses increase.

• The tax bill's effect on players will be analyzed based on different player types (recreational, small winning, professional, and high-stakes players), as the issue of paying tax on phantom income becomes more significant with larger losses.

  
  

How Recreational Poker Players are Affected

• Recreational poker players who expect to lose money for the year are typically not affected by the issue at hand because they do not have profits to report.

• Although recreational players may occasionally have a big score resulting in a surprising winning year, on average, they do not have profits to report, and therefore, this issue will not have an impact on them.

• As a result, recreational poker players can simply continue to have fun playing poker without worrying about the issue, and it is likely that they were not particularly interested in this topic to begin with.

  
  

How Small Winning Poker Players are Affected

• Amateur small winning poker players are affected by the new bill, as they would no longer be able to deduct their full losses from their winnings, with an example given of a player winning $120,000 and losing $70,000 over the course of a year.

• Under the new bill, instead of paying tax on $50,000 of profit, the player would only be able to deduct 90% of their losses, which is $63,000, resulting in a tax bill on $57,000.

• The change would likely increase the tax bill of small winning poker players in the example given, by around $2,000, depending on their tax bracket, which is undesirable but probably not a deal-breaker.

  
  

How Professional Poker Players are Affected

• Professional winning poker players, such as cash game grinders, can have significant wins, for example, $300,000 in a year, but also experience large losses up to $150,000 total in a year.

• These players normally pay tax on their profit, but due to the tax deduction limit, they can only deduct 90% of their losses, which in this case would be $135,000, resulting in a higher taxable amount of $165,000 instead of $150,000.

• This tax deduction limit can increase the tax bill of professional poker players, with an estimated increase of around $4,000, and the problem worsens as the losses get bigger.

• The issue of tax deduction limits on losses affects professional poker players disproportionately, as their losses can be substantial, and the 90% deduction limit does not fully account for these losses, leading to a higher tax liability.

  
  

How High Stakes Tournament Pros are Affected

• High-stakes tournament professionals, such as Daniel Negreanu, are significantly affected by the Trump Tax Bill.

• Negreanu lost $86,000 playing poker tournaments in 2024, despite having wins totaling around $2.792 million.

• Under the Trump tax bill, Negreanu would not only lose $86,000 but also have a tax bill to pay, as if he had a winning year, due to the limitation on deducting buy-ins, resulting in a tax bill of $205,000.

• This situation could lead some high-volume, low-margin tournament poker players to decide that playing is not worth it, potentially causing the game to lose mega stars and affecting its popularity, as well as discouraging other players from advancing to higher levels.

• The poker community naturally views this as unfair, believing that players should pay tax based on their profits, not phantom income, and that losing prominent players would be detrimental to the game.

• However, the majority of people in the poker industry are not in this situation, as they are either recreational players, small winning players, or professionals with relatively low losses, unlike Negreanu.

  
  

Three Reasons for Optimism

• The poker industry is unlikely to be destroyed by the bill, as the vast majority of people, including recreational players and small winning players, will be unaffected or only slightly affected, and are likely to continue playing despite the annoyance of the bill.

• The legislation could have an unintended effect of leading to softer games, as amateur players will continue to play, while small winning players who cannot withstand this extra expense may stop playing, making the game softer for remaining players.

• There are efforts to overturn the legislation, including the proposed Fair Bet Act by Nevada senator Dena Titus, which would restore the amount that can be deducted back up to 100%.

• The Trump Tax Bill's origins as a budget reconciliation exercise rather than an ideological attack on gambling make it more likely that it will be overturned.

  
  

Join the PTO Poker Monthly Membership

• Given the expectation that poker will continue to thrive, why not join the PTO Poker Monthly Membership?

Membership Informational Video

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If you want to improve your poker game as quickly and inexpensively as possible, either sign up for the PTO Poker Membership or book a free consultation with me here. I hope after our 7-day free trial or after speaking with me, you'll find that our membership community is exactly what you are looking for.