If you don't pay taxes in the US, this article will be of no practical value. It may, however, offer an entertaining glimpse into the insanity that is US tax law.
I was just listening to the extraordinary Russ C. Fox on the equally extraordinary Thinking Poker podcast, hosted by Andrew Brokos and Carlos Welch. If you're not familiar with Russ, he is the tax accountant for many of the big names in the poker business. And some equally big names in the crypto business (the Venn diagram of the two is non-null).
Russ was discussing the new IRS rule that states that only 90% of gambling losses may be deducted on your taxes, while you must declare 100% of your wins. PokerOrg has covered this topic multiple times, including this piece when an attempt to roll back the change failed.
I speculated about the change's potential effect on tournament fields. Then again, maybe I'm completely wrong.
Defining a session: Why it matters
Anyway, Brokos neatly summed up the situation: "I think of it as a penalty for a losing session."
Now, you might ask, "Well, what's a session?" Can all of 2026 be one session? In which case I take all my 2026 buy-ins (tournament or cash), take 90% of that number, subtract that from my wins (or tournament payouts), and claim the difference?
Russ: "No. A year is not a session. And neither is a month or a week a session."
Russ says that for online players, you may be able to treat one day as a session. Unfortunately, the IRS has not officially ruled on this topic. So you have to do something reasonable and hope they'll agree with it. At the worst, they'll tell you that no, you can't do that, and you have to pay taxes based on what they call a session.
For live cash players, including yours truly, it's not clear to me if we can clump all of a day's sessions into one 'session.'
For instance, yesterday, I sat at a local casino and lost $90 in a $2/$3 game. Then I moved to a $3/$5 game and won $1,100. If that's two sessions, then I owe tax on $1,019. If it's one big session, I owe tax on $1,010.
While there are no guarantees, Russ said, "I strongly believe that a court would use your result from yesterday as one session."
The tax trap of short-term swings
Poker players are fond of saying, "It's all one long session."
Except when it's not.
Suppose you started playing at 7pm and are stuck $100. It's now 11pm, you're tired, and you decide to go home. That's fine (and good poker practice). You will enter the $100 loss into your bankroll tracker.
When 2027 rolls around and you're preparing your taxes, $90 of that $100 will be counted against your winning sessions for tax purposes. But suppose you stick around for one more orbit and win a pot that causes you to go from being stuck $100 to being ahead $100.
Watch the magical tax math here: You have increased your net worth by $200 from winning that pot. However, your taxable winnings have only gone up by $190. That's because by erasing the loss, you no longer pay the 'losing session' penalty that Andrew Brokos referred to. The last $10 of your profit from that pot is untaxed.
I'm no tax professional (Russ is), but I'm 99.99% sure this is correct.
What are the implications?
First, Thinking Poker co-host Carlos Welch, who has been a tournament pro for almost 15 years, said, "I'm switching to cash. Tournament players have losing sessions 80-85% of the time." Not being a tournament player (probably because I couldn't stand to lose 80-85% of my sessions), I hadn't given this any thought.
Even by the most generous interpretation of the definition of a 'session,' tournament players – even winning ones – have far more losing sessions than winning ones. They will pay this losing session penalty over and over again. Then finally they catch lightning in a bottle, win their flips, and come 3rd in a 1,000-player field. They have one 'session' that isn't penalized.
Cash players, for better or worse, can choose to quit a session any time. Of course, sticking around when you're tired and not playing well, trying to book a winning session – that's a mistake as old as the game. But now, for better or worse, there's an actual financial rationale for staying glued to your seat. This could end poorly.
Keep good records
Russ constantly drove home the point that all poker players need to keep good records. If you've kept good records, but the IRS doesn't like the way you did the accounting, they'll send you a letter and tell you to do it differently. If you don't have records to back up the wins and losses, things could get a great deal more serious.
The good news is that Russ said on the podcast, "This wacky tax rule will get reversed. Eventually." You could hear the boldfaced type in the word 'Eventually.' Until 'eventually' rolls around, it is no longer one big session.
Keep those records precise.
Feature image created by AI.
