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Calling yourself a professional gambler on your tax return is not the same as being one. The IRS knows the difference. So does the Tax Court.
The stakes for getting this wrong are high. Misclassifying gambling income and losses as Schedule C business activity instead of Schedule A itemized deductions can result in disallowed deductions, accuracy-related penalties, and self-employment tax liability on every dollar of net gambling income. If you are thinking about claiming professional gambler status, or already have, here is what the law actually requires.
The Groetzinger Standard
The Supreme Court established the baseline in Commissioner v. Groetzinger, 480 U.S. 23 (1987). Robert Groetzinger spent 60 to 80 hours per week wagering on greyhound races, had no other employment, and gambled solely for his own account. The Court held that he was engaged in a trade or business under IRC ???? 162(a) and 62(1).
The test the Court applied: the activity must be pursued full-time, in good faith, and with regularity, and the taxpayer must have a primary purpose of making income or profit.
That is the floor. The IRS and the Tax Court have spent the decades since Groetzinger clarifying who clears it. Most people who try to claim professional status do not.
What “Full-Time” Actually Means
Hours matter. Profit motive matters. Having a day job and also gambling frequently does not qualify.
In Boneparte v. Commissioner (T.C. Memo. 2017-208), a Port Authority employee earning over $78,000 per year spent roughly half his nights gambling in Atlantic City. He filed a Schedule C claiming professional gambler status for 2012 and 2013. The Tax Court denied it. Eight of the nine profit-motive factors under Reg. ?? 1.183-2(b) weighed against him. He did not keep contemporaneous records. He had a consistent history of gambling losses. He had no expertise or strategy distinguishing his activity from recreational play. He had stable income from his regular employment that allowed him to absorb those losses without financial pressure.
The court’s analysis focused on what Boneparte actually did, not what he called himself on the return. The nine factors under Reg. ?? 1.183-2(b) are not a checklist to satisfy minimally. They are a holistic picture of whether the activity is a genuine business:
- The manner in which the activity is conducted
- The taxpayer’s expertise or reliance on expert advisors
- The time and effort spent on the activity
- The expectation that assets will appreciate
- Success in similar activities
- History of income or loss from the activity
- Amount of occasional profits
- Financial status of the taxpayer
- Elements of personal pleasure or recreation
For a recreational gambler with a full-time job who enjoys casino visits, most of those factors point in one direction.
What Professional Status Actually Gets You
Here is the reason people try to claim it: a professional gambler files a Schedule C, not a Schedule A. That means gambling losses are trade or business losses, not itemized deductions. If you cannot itemize, or if itemizing does not benefit you, you lose access to your gambling loss deductions entirely as a casual gambler.
The professional also gets to deduct ordinary and necessary business expenses under IRC ?? 162(a): travel to casinos, handicapping data subscriptions, meals, lodging, and research costs.
But this is where the analysis gets more complicated.
The Section 165(d) Wall and What the OBBBA Changed
Even professional gamblers cannot deduct wagering losses beyond their winnings. IRC ?? 165(d) limits losses from wagering transactions to gains from wagering transactions. Mayo v. Commissioner, 136 T.C. 81 (2011), confirmed that ?? 165(d) applies to all gamblers, including professionals.
The Tax Cuts and Jobs Act of 2018 went further. It expanded the definition of losses from wagering transactions under ?? 165(d) to include all deductions otherwise allowable under Chapter 1 that are incurred in carrying on wagering transactions. That language reversed the part of Mayo that had allowed professionals to deduct non-wagering business expenses even when doing so created a net loss beyond amounts wagered. After the TCJA, professional gamblers could no longer use travel, meals, and handicapping costs to push their Schedule C into a loss position.
The One Big Beautiful Bill Act, enacted in 2026, made two additional changes under Section 70114. First, it made the TCJA expansion of ?? 165(d) permanent. Second, it imposed a new cap: losses from wagering transactions are now deductible only up to 90 percent of gambling winnings for the taxable year.
That 10 percent haircut applies to every gambler, professional or not. A taxpayer who wins $100,000 and loses $100,000 now has $10,000 of net taxable gambling income, not zero.
The Self-Employment Tax Problem
Professional gambler status is not a one-sided benefit. Net gambling income on a Schedule C is subject to self-employment tax under IRC ?? 1401. For a taxpayer netting $80,000 from gambling, the self-employment tax exposure is roughly $11,000 on top of ordinary income tax. Casual gamblers whose winnings show up on Form W-2G are not subject to self-employment tax on those amounts.
This is a significant and often overlooked cost of professional status. The question is not just whether you can qualify. The question is whether qualifying actually improves your tax position when the full picture, including SE tax, the ?? 165(d) cap, and the limitation on business expense deductions, is considered.
What to Do If You Think You Qualify
If you are a full-time gambler with no other employment, detailed records, a consistent profit-oriented approach, and gambling as your primary livelihood, professional status may be appropriate. If you have another job, gamble recreationally, keep no records, and have a consistent history of net losses, you should not be filing a Schedule C.
The IRS scrutinizes these claims. The documentation requirements are the same as any other business: daily records of wins and losses, session logs, and expense receipts. If you cannot produce records that would survive an audit, you should not be claiming the status.
Our firm has handled professional gambler audits and examination responses where the IRS rejected Schedule C treatment and recharacterized gambling activity as casual. The consequences include disallowed deductions, accuracy-related penalties under IRC ?? 6662, and in some cases civil fraud exposure if the filing position was not supported by a reasonable basis.
Matt Wildes, JD | CLAW Tax Group
If you have questions about your gambling tax treatment, or have received an audit notice related to gambling income, contact CLAW Tax Group. We represent taxpayers in IRS examinations and Tax Court proceedings involving professional gambler status and related issues.
The content of this article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional for guidance specific to your situation.
