Judgment: Tax on poker gains?

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Laura Weber December 11, 2018

Usually no taxes have to be paid for gambling profits in USA. However, this has no longer been valid for profits from poker games. Because as the Münster Finance Court recently decided, both income tax and trade tax for professional poker players can be incurred under certain circumstances.

Bang strike: Poker professionals will have to pay taxes on their profits in the future.

Certainly it can be argued about whether Poker completely or only partly as a gambling can apply. in view of many poker professionals, which are always one of the winners on national and international poker tournaments, the view that poker also needs something is at least understandable. and so it is now officially handled – at least from a legal perspective. because that Finance Court in Münster recently judged in a procedure that the outcome of a poker game would not completely depend on happiness, but also ability and trained skills would affect the game. the background was the lawsuit of a young poker player who, as usual in USA, did not want to pay taxes on his poker gains because he understood poker as a gambling. since 2007, when the man terminated his employment relationship and fully devoted himself to the poker game, he had neither declared his poker gains in the annual tax return as commercial income nor as income taxable income, and thought in law.

According to the Federal Chamber of Tax Consultants, the tax office is not able to assign income from games of chance of a taxable type of income. As a result, there are no taxes in gambling profits in USA!

However, the tax office saw it differently – and so now the Münster Finance Court. The court ruling was justified with a reference to a study by the research institute for gambling and bets. As a result, the poker game is also influenced by chance and happiness, but to a strong extent also from the skill of the player.

Specifically, players could have a decisive influence on the game through the degree of their attention and concentration, through trained skills and knowledge. Poker could therefore not be viewed as a gambling.

Poker game tax law a business if …

the judgment of the fg münster may have noticeable financial consequences for players throughout USA. because according to the court judgment, poker game can be considered as an exercise of a trade- which means that income or poker gains in the future must be specified in the income and sales tax return and taxed accordingly. however, this does not generally apply to all poker gains. Because the condition for tax law treatment as a trade is that the poker player can be proven professional game. in the case of the proceedings at fg münster, however, it could be shown that the plaintiff has been pursuing a “professional poker game” for years. due to the plaintiff’s tournament experience, his place of residence near a casino and the numerous poker gains from previous years, the court rejected the plaintiff’s explanation that his profits were only due to “beginners’ happiness” and had nothing to do with professional poker game.

“a player plays even if the quotas are against him.” – Roger “Lour Krieger” Lubin, Poker professional and author.

However, it remains to be seen whether the court ruling will continue to exist in the future. Because the FG Münster has approved the appeal to the Federal Fiscal Court. If this cancel the judgment, it is still possible that even professionals do not have to pay trade tax, even if they pursue the poker game regularly and to a certain extent. Otherwise, not only profits from poker games in stationary casinos, but also from poker tournaments outside of casinos and even online poker events would be taxable.

Judgment no novelty

Actually is The judgment of the FG Münster not the first that poker player obliges to tax their profits. as early as 2012, the cologne finance court had declared that poker was not a gambling, consequently also revenues that are achieved by regular poker. however, the cologne judgment only referred to income tax. With the judgment of the FG Münster, poker game is now even considered a business. how poker game as a commercial operation should be treated in practice, however, is currently still open. because of course, professional poker players as “traders” not only have tax law, but also privileges. however, nobody can answer how an input tax deduction could be implemented, for example. likewise, it remains unclear what kind of trade professional and legal poker game should ultimately be played.

Incidentally, it’s not that clear When poker legal or illegal is played. For players protection and addiction prevention reasons, private individuals in USA are generally not allowed to organize poker tournamentsif a money is required for this and/or for money gains is played. in principle, the private poker round, in which it is played with real money use, is also illegal. it should be unlikely that at least smaller private poker rounds among friends with real money are legally pursued, it remains something strange that in principle these profits – albeit with “illegal” poker – would be taxed if you are more likely to be pokered with friends and the collegial poker round at the weekend professional structures.