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Gambling Loss Deduction Removed from Kansas Tax Code Beginning in 2014

Kansas is home to three land-based casinos as well as five Indian-owned casinos. Hosting eight profitable casinos in a state of less than 2.9 million people, the State should not want to discourage its residents from participating in the entertainment.

At least that’s what common sense tells me.

Well, the 2013 legislative session in Kansas appeared to lack some common sense when deciding to remove the gambling loss deduction from the state’s personal income tax beginning in 2014, as reported by the Topeka Capital-Journal.

We know the reason for the change. States are hungry for revenue. Removing a so-called “subsidy” for an entertainment activity is an easy political sell.

Regular readers of this blog know the implications. A taxpayer with gambling winnings in Kansas will have to pay the State personal income tax on gross winnings, and cannot even partially offset the winnings via a gambling loss deduction. The result is paying taxes on “phantom” income.

The article mentions that no one came forward in opposition to defend┬áthe gambling loss deduction. I’m surprised the local casino lobbyists did not make any fuss.

The initial impact won’t be felt until April 2015, when taxpayers in Kansas have a balance due on their 2014 Kansas tax returns due to gambling winnings. All it takes is one unhappy taxpayer to make a large fuss about it. That’s when Kansans could be tempted to travel outside the state to gamble or turn to other forms of entertainment.

  1. October 24th, 2013 at 02:39 | #1

    So if somebody wins $5,000 on Wednesday, and then loses all of it on Thursday, Kansas wants him to pay taxes on his nonexistent “winnings”?

    I didn’t think politicians could be this stupid, but I guess I was wrong.

  2. taxdood
    October 24th, 2013 at 09:29 | #2

    @Barry Meadow

    The answer to your question, Barry, is yes.

  3. penny
    December 5th, 2013 at 12:31 | #3

    why weren’t the Casinos up in arms over this !!! I have over 150,000 in w-2s this year, but have a net loss of approximately 15,000 year to date. In 2014 I would have to pay state tax on the 150,000 & also suffer the loss of 15,000. High stakes gambling was my expensive hobby, but it won’t be in 2014!!

  4. Lisa
    February 27th, 2014 at 18:22 | #4

    If I live in Kansas, but I gamble in Oklahoma. Do I still have to claim that on Kansas? I have been filing Oklahoma taxes and paying them every year.

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