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Posted at 08:00 2012-05-24 by Barry Gallagher
With the World Series of Poker (WSOP) rapidly approaching many players see the fame, the lights and the glory of it all. Huge figures are thrown around about the money you can make. However, there is a major factor to consider before you book your flights to Las Vegas and pay the USD$10,000 to enter the WSOP Main Event — Taxation.
Tax is something many players wouldn’t consider but it is a crucial factor in deciding if your investment in a tournament is a plus expected value decision. In this article Barry Gallagher will attempt to dissect the taxation situation for players in Las Vegas this summer.
In recent years the prize pools at the WSOP have been eye-wateringly large but so is the level of taxes some have had to pay after winning big in the City of Sin. The 2010 Main Event winner Jonathan Duhamel paid $4.3 million of his $8.9 million win to the Canadian Government, whilst Peter Eastgate faired even worse having to fork out 73% of his $9.1 million to Danish tax authorities in 2008. Conversely, German Pius Heinz didn’t have to pay a single cent of his $8.7 million to appease any tax hungry government office.
So what is the difference? The first stage of the tax hurdle is your tax residency status. If you are a resident of Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russian Federation, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom you benefit from a tax treaty which absolves you from paying on your gambling winnings in the United States. Australia as you can see is absent from this list which means an Australian who wins in Vegas will pay 30% of their winnings to Uncle Sam.
The next stage is to define if you are a poker professional or not. If you are not a professional player the 30% tax is a final withholding tax. However, if you are a professional you may be able to file a US income tax return and claim back gambling losses including tournament entry fees against any tax you pay. If you are a professional your best advice is to speak to a tax advisor who specialises in US taxation laws.
The final stage is the status of taxation on gambling winnings in your home country. In some countries gambling winnings are not taxed while in others they are taxed as income. Australia’s stance on the issue was best tested when Joe Hachem won the WSOP Main Event in 2005. Hachem went to battle with the Australian Tax Office (ATO) to claim he was not a poker professional at the time he won the "Big Dance." Eventually, the ATO agreed and ruled that because Hachem was at that time playing poker as a hobby and it wasn’t his main source of income he would not be taxed in Australia on his winnings. Had they ruled he was a professional Hachem would have been subject to tax on the remainder of his winnings after the US government had taken its 30%.
As you can see the taxation issue is indeed a serious consideration. For most it will mean 30% of your winnings will be withheld as an Australian and if you are a poker professional things will get even more complicated. In fact the situation is putting off some Aussie pro’s from playing a full schedule of events. Aussie Millions winner Oliver Speidel told PokerNews he’ll be in Vegas to play the Main Event but may not play too many events saying “The tax issue for Aussies has been a big turn off.” Speidel is reserving his action for the most plus EV tournament of the year where the poor quality of the field and the benefits of winning will mean the damaging tax implications can be overcome.
Barry Gallagher is not a tax expert. For full tax advice speak to a qualified Tax Advisor.
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