Guest Author: Matthew R. Porter, Esq., Columbus, Ohio
This article provides a synopsis of the new Ohio income tax deduction, and provides guidance on how it effects the tax deductions for amateur gamblers. At Nardone Law Group, LLC, our tax attorneys have been writing extensively to our clients in Ohio and around the world on the tax distinctions and consequences of being a professional gambler versus an amateur gambler. In these articles, our tax lawyers have provided guidance on how to qualify as a professional gambler to obtain beneficial tax treatment. Our tax lawyers have also discussed the Mayo decision, which was a recent Tax Court ruling that allowed professional gamblers to not only deduct gambling losses to the extent of their winnings but also deduct ordinary and necessary business expenses relating to their gambling trade or business. Finally, our tax lawyers have highlighted the penalties for failing to qualify as a professional gambler. These articles indicated that there is a marked distinction in the federal tax consequences of filing as a professional gambler versus filing as an amateur gambler. A bill recently signed into law in Ohio, however, creates a significant tax deduction for amateur gamblers in Ohio starting in the year 2013. Here's how.
Amateur Gamblers and Ohio Income Tax Deduction
The Ohio legislature passed HB 519 and Governor Strickland signed the bill into law on June 10, 2010. The new law implements the casino constitutional amendment that was signed into law in November 2009. The law also creates a new Ohio income tax deduction for gambling losses on bets placed at casinos, horse races, bingo halls, and other forums, both in state and out of state. The new income tax deduction will ultimately reduce a taxpayer's taxable income. Beginning January 1, 2013, amateur gamblers in Ohio may claim a deduction for any gambling losses that are allowed as an itemized wagering loss deduction and that were deducted in computing federal taxable income, to the extent the loss was not deducted or excluded in computing federal or Ohio adjusted gross income. The new law can be found at Ohio Rev. Code Ann. §5747.01(A)(29).
From a federal taxation standpoint, professional gamblers are allowed to deduct their gambling losses to the extent of their gambling winnings on Schedule C. Because professional gamblers may lose more than they win, the Schedule C deductions will typically offset any increase to their federal adjusted gross income. Amateur gamblers, however, must itemize their gambling losses meaning that their deductions are limited. The result is that amateur gamblers are often hit with a large state income tax bill. The new Ohio law allows amateur gamblers in Ohio to deduct gambling losses to the extent of their gambling winnings from their Ohio income tax, thus lowering their state tax bill and creating a very advantageous tax benefit that was previously not available. This is great news.
The Ohio Legislative Service states its position with respect to the new law as follows:
"New income tax deduction: The bill creates a new deduction for wagering losses under the personal income tax. Taxpayers may deduct to the extent not deducted or excluded in computing their federal adjusted gross income any loss from wagering transactions allowed and taken as an itemized deduction on Schedule A in their federal income tax returns. The deduction will create a revenue loss from the personal income tax. The amount of revenue loss is uncertain. However, according to the Department of Taxation, the annual loss is likely to be in the tens of millions of dollars. Under permanent law, personal income tax receipts are distributed to the General Revenue Fund (GRF, 94.1%), the Local Government Fund (LGF, 3.68%), and the Public Library Fund (PLF, 2.22%)."
Contact Nardone Law Group, LLC
If you are a professional or amateur gambler, you should contact an experienced tax lawyer today to make sure you are obtaining all of the tax deductions available to you. The tax lawyers at Nardone Law Group, LLC have vast experience representing clients before the IRS to obtain tax deductions for gamblers. Our experienced tax lawyers will thoroughly review your case to determine the best possible tax deductions based on your gambling activities. Contact us today for a consultation to discuss your case.