I am not a tax professional either, but I generally rely on tubotax, and that is very clear that you do not get to deduct the cost of the shares from the winnings. I’m not entirely clear whether the taxable income is the $100 nominally won, the $98.50 after the first fee, or the $93.57 after the second fee, but those numbers are close enough that it doesn’t really make a difference. See https://turbotax.intuit.com/tax-tips/jobs-and-career/how-to-pay-taxes-on-gambling-winnings-and-losses/L7JNH7mjn.
Thanks for the link, it looks like you’re right about being taxed on the $100/98.50/93.57. However, the initial $85 can be deducted from your taxable income (if less than your winnings).
So if you’re in, let’s say the 25% tax bracket, you have saved 25% * $85 = $21.25 in taxes, and have still made money on your bet. This becomes a bit murkier when considering standard deductions vs itemizing. Perhaps a more experienced bettor can chime in to step through the implications?
That is correct (for US taxpayers). You take all your gambling winnings, from whatever source derived, and subtract all your gambling costs to get your taxable gambling income (minimum $0/yr, no carry-over of losses).
I don’t know how many of the fees count, but the $85 certainly does.
If you are more than an occasional gambler (eg “professional” poker player) you can do your own accounting, and report your net take. So, if you keep proper records, you should be able to report “on Jan 1, my predictit balance was $5,000. I deposited an additional $5,000 during the year, and withdrew $10,000 during the year, and ended with a balance of $7,500. Therefore, I had $7,500 in gambling winnings this year.”
From the first link I posted: “[Y]ou can’t subtract the cost of gambling from your winnings. For example, if you win $620 from a horse race but it cost you $20 to bet, your taxable winnings are $620, not $600 (after subtracting your $20 wager).” If you think Turbotax is wrong, I strongly encourage you to offer more than your word as a random person on the internet.
It’s nuanced. Apparently you do need to be itemizing deductions:
https://www.irs.gov/taxtopics/tc419
On the plus side, if you keep each individual payout below $600, you can avoid it entirely.
I see that the rules were likely changed with the Trump tax changes in 2016, I apologize for spreading outdated information.
Where does it say that you can deduct the $85? All I’m seeing is that you can deduct gambling losses, and if you win the bet (which is the scenario we are considering), then I would think your gambling losses would be zero.
I’m pretty confident that the $85 would only be a loss if you loose the bet, which is not the scenario we are considering. I haven’t found anything specifically on predictit, but here’s what I found on slot machines, and I think the analogy is pretty clear:
”A taxpayer recognizes a wagering loss if … the total dollar amount of wagers placed by the taxpayer on electronically tracked slot machine play exceeds the total dollar amount of payouts from electronically tracked slot machine play during the session.”—https://www.thetaxadviser.com/issues/2016/oct/taxation-of-gambling.html
Second, while all gambling gains are reportable, only large wins get automatically reported (>$1200 or 100⁄1, I believe, depending on format). These are generally reported on a Form W-2G, not a Form 1099. You may deduct gambling losses against your reported win IF you itemize deductions (if you take the standard deduction, you’re out of luck). Further, if you are a professional gambler (i.e. as a primary source of income) you may deduct all losses, even beyond your winnings (but none of us are professional gamblers, so don’t try that).
I am not a tax professional either, but I generally rely on tubotax, and that is very clear that you do not get to deduct the cost of the shares from the winnings. I’m not entirely clear whether the taxable income is the $100 nominally won, the $98.50 after the first fee, or the $93.57 after the second fee, but those numbers are close enough that it doesn’t really make a difference. See https://turbotax.intuit.com/tax-tips/jobs-and-career/how-to-pay-taxes-on-gambling-winnings-and-losses/L7JNH7mjn.
Thanks for the link, it looks like you’re right about being taxed on the $100/98.50/93.57. However, the initial $85 can be deducted from your taxable income (if less than your winnings).
So if you’re in, let’s say the 25% tax bracket, you have saved 25% * $85 = $21.25 in taxes, and have still made money on your bet. This becomes a bit murkier when considering standard deductions vs itemizing. Perhaps a more experienced bettor can chime in to step through the implications?
That is correct (for US taxpayers). You take all your gambling winnings, from whatever source derived, and subtract all your gambling costs to get your taxable gambling income (minimum $0/yr, no carry-over of losses). I don’t know how many of the fees count, but the $85 certainly does. If you are more than an occasional gambler (eg “professional” poker player) you can do your own accounting, and report your net take. So, if you keep proper records, you should be able to report “on Jan 1, my predictit balance was $5,000. I deposited an additional $5,000 during the year, and withdrew $10,000 during the year, and ended with a balance of $7,500. Therefore, I had $7,500 in gambling winnings this year.”
From the first link I posted: “[Y]ou can’t subtract the cost of gambling from your winnings. For example, if you win $620 from a horse race but it cost you $20 to bet, your taxable winnings are $620, not $600 (after subtracting your $20 wager).” If you think Turbotax is wrong, I strongly encourage you to offer more than your word as a random person on the internet.
It’s nuanced. Apparently you do need to be itemizing deductions: https://www.irs.gov/taxtopics/tc419 On the plus side, if you keep each individual payout below $600, you can avoid it entirely. I see that the rules were likely changed with the Trump tax changes in 2016, I apologize for spreading outdated information.
Where does it say that you can deduct the $85? All I’m seeing is that you can deduct gambling losses, and if you win the bet (which is the scenario we are considering), then I would think your gambling losses would be zero.
Entry fees count as “losses”.
I’m pretty confident that the $85 would only be a loss if you loose the bet, which is not the scenario we are considering. I haven’t found anything specifically on predictit, but here’s what I found on slot machines, and I think the analogy is pretty clear:
”A taxpayer recognizes a wagering loss if … the total dollar amount of wagers placed by the taxpayer on electronically tracked slot machine play exceeds the total dollar amount of payouts from electronically tracked slot machine play during the session.”—https://www.thetaxadviser.com/issues/2016/oct/taxation-of-gambling.html
First, PredictIt issues a 1099 on net income. They remove your investment for you automatically. IT IS NOT CONSIDERED GAMBLING. https://predictit.freshdesk.com/support/solutions/articles/5000692877-how-do-you-calculate-a-trader-s-net-profit-for-tax-reporting-purposes-
Second, while all gambling gains are reportable, only large wins get automatically reported (>$1200 or 100⁄1, I believe, depending on format). These are generally reported on a Form W-2G, not a Form 1099. You may deduct gambling losses against your reported win IF you itemize deductions (if you take the standard deduction, you’re out of luck). Further, if you are a professional gambler (i.e. as a primary source of income) you may deduct all losses, even beyond your winnings (but none of us are professional gamblers, so don’t try that).