[Kurn]

OK. Here's the naked truth.

Let's say you're a young single guy who does not own a home, thus has no mortgage interest to deduct so you normally take the standard deduction. ($5,350.00 this year, I think)

Say last year you netted -$500 based upon $8,000 in winning sessions and $8,500 in losing sessions.

OK, so $8,000 goes on page 1 of form 1040 as *other income*. Now, to deduct you losses you MUST itemize deductions, so on schedule A, you enter $8,000 for *gambling losses* (can't deduct losses in excess of wins). Now if you do not have a ton of medical expenses, you're not going to find much more in other deductions - state and local taxes paid is one, medical is probably out since those are in excess of (I think 2.5% of your AGI and you just inflated your AGI by $8,000), so lets say you have a total of $10,000 in deductions.

Your additional deductions now that you've lost the Standard Deduction are $4,650, but your additional income is $8,000.

Thus you are going to pay taxes on $3,350 of additional (by non-existant) income.

As I've said before, I understand the IRS' logic. This is based on a B&M world, where the IRS understood that the average casual gambler will not claim the $500 he/she wins at a casino on vacation either through ignorance or a "who cares" they can't catch me" attitude, and the truth is, the IRS does not have the resources to chase that money. So they based the algorithm on the concept that they soak the people who a) make enough from gambling that they know there's a good chance of getting audited, or b) know the law and are (I'll be kind here) are honest to a fault.

One last point. This is by far not the only example of what is fucked up about the US tax code.