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Earned Income Tax Credit for Professional Gamblers

An example of a popular question during tax season:

“I became a professional poker player in June 2010.  Prior to then, I was a full-time college student and earned no income.  Since June, my net gambling winnings are small in amount.  Do I still need to file a tax return?”

The answer:  Probably.

There are many reasons why the answer is likely yes.  One is because if income from self-employment for the year exceeds $400, the taxpayer must file.  Another reason to file is the possible availability of the Earned Income Tax Credit (EITC).  The EITC is available for some low income individuals, and may generate a refund, which is additional money in the taxpayer’s pocket.

To be eligible for the credit, the taxpayer must have:

  • “earned income” and “adjusted gross income” less than a certain amount;
  • a valid Social Security Number;
  • filing status other than married filing separately;
  • US citizenship or be a US resident alien;
  • no foreign income;
  • investment income less than a certain amount.

Regarding the “earned income” and “adjusted gross income” amounts, this IRS article provides a summary.  For single taxpayers with no qualifying children, for example, earned income and AGI must both be less than $13,460 to be eligible for the credit for the 2010 tax year.

“Earned income” includes wages, salaries, tips, and other employee compensation, plus the amount of the taxpayer’s net earnings from self-employment.  Thus, from my reading of the EITC statute, gambling winnings of professional gamblers IS considered “earned income,” but gambling winnings of recreational gamblers IS NOT considered “earned income.”

The credit amount is determined by a formula.  If you believe you may qualify for the EITC for the 2010 tax year, be sure to read this IRS publication for further assistance.

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  1. Joe Steere
    February 2nd, 2011 at 07:20 | #1

    Good stuff tax Dood! I had to address this very question here at our military VITA site in Korea. Thanks for the info

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