• tax advice including, for example, fees paid to TraderStatus.com™
• subscriptions to gambling magazines and newspapers
• gambler guides and books
• seminars and ongoing education (if not merely qualifying a recreational gambler to become a professional gambler)
• start-up and organizational costs (paid after 10/22/04)
  • up to $5,000 maximum is deducible in the first year
  • any amount over $5,000 must be amortized over 15 years
  • this deduction is only allowed if tax return is not filed late
• dedicated telephone usage and long distance
• cell phone, pager and messenger fees
•  wireless gaming fees
• cable fees
• on-line services and connection fees
• gambler tip services & newsletters and news service fees
• gaming chat room fees or subscriptions
• office rent (but not if paid to yourself)
• office supplies, postage, bank charges and wire fees
• certain club memberships, dues and fees
• clerical and record keeping expenses
• wages paid to your spouse, kids, or parents for their assistance
   
• interest expense paid:
  • on loans used for maintaining professional gambler's positions
  • including, in certain circumstances, your credit card interest under the §1.163-8T general tracing rules
  • on home mortgage debt if an irrevocable §1.163-10T(o)(5) election is made
  • this so-called "margin interest" is generally fully deductible for active traders because it is not subject to the regular "investment interest" limitation on IRS form 4952
  • passive investment in separate gambler entities is subject to the limitation on IRS form 4952
    
    
• depreciation & the 50% bonus depreciation, on furniture, television, computer equipment and software
  • computers & equipment 5 year life (Rev Proc 87-56)
  • office furniture & fixtures 7 year life (Rev Proc 87-56)
  • it is penny wise and pound "audit bait" foolish (or just plain ignorance) taking a deduction using other periods such as 3 year lives (which by law is basically limited to tractors and horses ( §168(e)(3))
    • the 50% bonus depreciation rule expired on 12/31/2004
       
• up to $112,000 of "§179 deduction" in 2007 ($102.,000 in 2004, $105,000 in 2005 and $108,000 in 2006) in lieu of depreciation (if proper election is filed)
  • computers, other equipment, software and furniture qualify.
  • automobiles and SUV's on a car chassis with unloaded GVW of 6,000 pounds and SUV's on a truck chassis , Trucks & Vans with a loaded GVW over 6,000 pounds may be eligible for §179 (through 10/22/2004)
  • Effective 10/23/2004 SUV's weighing 6,001 to 14,000 pounds may be eligible for §179 to a maximum of $25,000.  SUV's over 14,000 pounds or holding a driver + 9 passengers still have the $102,000 limitation.
  • $108,000 limit (as adjusted for inflation) was scheduled to revert to $25,000 on January 1, 2006 (on 10/22/04 this provision was extended to January 1, 2008)
  • to qualify for the annual $106,000  §179 deduction you must spend less than $430,000 in 2006 ($410,000 in 2004 and $420,000 in 2005)
    
• travel and automobile expense
• auto mileage rate 2007 up to four cars at a time @ 48.5¢/mile
  • note that the medical & moving mileage rates are 20¢/mile
  • the charitable purposes mileage rate is 14¢/mile
• auto mileage rate 2006 up to four cars at a time @ 44.5¢/mile
  • note that the medical & moving mileage rates are 18¢/mile
  • the charitable purposes mileage rate is 14¢/mile, there's special rates for Katrina
• auto mileage rate 2005 up to four cars at a time @ 40.5¢/mile thru Aug. Sept to Dec @ 48.5¢
  • note that the medical & moving mileage rates are 15¢/mile thru Aug. Sept to Dec @ 22¢
  • the charitable purposes mileage rate is 14¢/mile, after Aug 24^th there's special rates for Katrina
• auto mileage rate 2004 up to four cars at a time @ 37.5¢/mile
  • note that the medical & moving mileage rates are 14¢/mile
  • the charitable purposes mileage rate is 14¢/mile
• auto mileage rate 2003 one car at a time @ 36¢/mile
  • note that the medical & moving mileage rates are 12¢/mile
  • the charitable purposes mileage rate is 14¢/mile

• home office expenses¹.
• maid service and cleaning
• unreimbursed expenses (if business entity's papers are properly documented)
• on-premises athletic facilities (if your business entity is properly designed)
• deductible retirement plans, including the Single-Participant 401k on wages (click here for more) (if the business is properly designed)
• a non-deductible Roth IRA in lieu of a regularly deductible IRA
• fully deductible medical & health care expenses or even a §501(c)(9) VEBA trust (if the plans are properly designed) - Note effective in 2006, IRS is attacking "abusive VEBA plans" that are promoted elsewhere on the internet.
• child care and other §125 cafeteria plan deductions (if the plan is properly designed)
• other fringe benefit plans (if the plans are properly designed)
• 50% deductible restaurant meals had with friends who are fellow gamblers, lawyers, bankers, advisors
• 50% deductible gifts to friends and entertainment with people who are fellow gamblers, lawyers, bankers, advisors
• all the above with your spouse (if business purpose is properly documented and conducted)
• 100% deductible §119 daytrader's daily pizza and Chinese take-out meals (if your c-corp or other entity is properly designed)
• 100% deductible §119 professional gambler's monthly residence rent payments (if your c-corp is very strictly and properly designed)
• Most start-up and early organization expenses incurred after October 22, 2004 for an entity are fully deductible, rather then being amortized over 60 months as the earlier rule required.
• Other Tax Deductions and Your Small Business
   

Because of this favorable "trade or business" treatment, a professional gambler's net profits are subject to Self-Employment tax, under IRS Code §1402 (a)(3)(A)

Taxpayers who qualify to file as Professional Gambler Status may "elect" such classification each year by a filing an appropriate tax return with the IRS.


A Professional Gambler's Responsibilities



What Is a Gambling Session?



¹ Deduction for Business Use of Your Home

One provision of the 1997 tax act, which was delayed to be effective for years after 1998, greatly relaxes the rules that must be met in order to deduct business use of your home.

A major change is the elimination of the rule that required the office be your "principal place of business" -  the place where you meet with customers or the place where you generate most of your income. That is not the current requirement.

The new rule is a simple test requires that the use of the office be an "ordinary and necessary" expense for the business and, unless this is the only fixed location of the business, it must be the only place available where you can perform the necessary "administrative or managerial" functions of the business.

Note that this does not change the requirement that the office must be used "totally and exclusively" for the business, and have no other use whatsoever. This is very strictly interpreted, and any degree of non-business use will disqualify the office. (Theoretically, if you have your computer in your home office, and sometimes use it to track personal investments, surf the web, or play an occasional game that can cause you to lose all deductions for use of the home office for the year.)

Also, if the use of the office is as an employee, that use must clearly be solely for your employer's convenience, not yours. If you are provided a suitable place to work by your employer (even if that means a 25 mile drive to the office in the middle of the night, when you are on-call to return customer emergency calls), that precludes you from claiming deductions for use of your home.

Note that, if your office in home qualifies for a deduction under the revised laws, it can be considered a "place of business" for determining your deductible business mileage, therefore it would not be non-deductible commuting.

The office in the home deduction generally is limited to an amount not to exceed your trading profits less your trading expenses. The excess office in the home deduction may be carried forward to be used in the following year(s).

Pass-thru entity unreimbursed expenses require proper documentation and must have no waived right for reimbursement.