Treating Poker as a Business Part 2: Expenses & Deductions
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Saturday, April 1, 2006
By Paul Randall
In the first installment of this series, we looked at the convoluted issue of taxation and poker winnings. This article l will take you through structuring your poker playing as an active business. Regardless of your stance on the issue of taxation, the fact of the matter is you could very well be audited and you will want to be prepared with records of your business activities. Keep in mind that the CRA has seven years to go back and audit your tax filing. If you plan to claim your winnings as income then this article should give you an idea of how to keep accurate records of income expenses and give you an idea of what you will be able to claim as deductions. For the purposes of this article, l am going to assume that we will want to make the business recording as simple as possible. The first step to take is to find a good accountant. You have three options here; CMA, CGA, or CA.
Please don't cheap out and hire a bookkeeper, you get what you pay for here. Bookkeepers have their place and may be a necessary addition in the future, however, for today, a licensed accountant is the way to go. A good accountant will be invaluable and give you all the help and assistance you need for record keeping and income tax reporting.
The most basic and essential aspects of running any business and poker not being the exception is to keep records of all income and expenses. You must keep clear, accurate, consistent and thorough records. You may choose to use paper-based ledgers or a computer spreadsheet such as Microsoft Excel; either way make sure you log every session and every expense you incur in the operation of your business. l have found it immensely helpful to have a separate bank account for my bankroll as well as a separate credit card on which I only charge business expenses such as gas, food and accommodations,
You should be keeping all related receipts but having a credit card used exclusively for business helps keep track of expenses should you lose or misplace some receipts. Once again, your accountant will be able to guide you through how to keep accurate records. There are vast differences in what expenses are directly related to you business when it comes to online play versus live play. I will go through live play deductions first as they are more obvious. Any travel expenses to and from a casino trip can be claimed; it is a good idea if you wish to write off travel expenses that you log the miles of each trip, make sure you keep any gas and coffee pit stop receipts as well. I keep a logbook in my car and an envelope for receipts, any food, drinks (alcohol will not be accepted) and accommodation expenses will be deductible. Make sure in your session log you record the date, location and time you started and finished. Obviously how much you sat with and what you cashed out at will be recorded.
Online play opens the door for many interesting deductions. Let me start with the obvious ones. Any internet expenses will be deductible based on the percentage used for personal use versus use for poker playing. Any fees incurred on transferring money to your online account (Neteller fees for example) will be considered a business expense. Using a depreciation method your computer equipment will be an allowable expense (capital goods are depreciated over time with the lost value in a given year being the amount you will claim.)
Do not worry about this formula, as your accountant will know it cold. Where things get interesting is if you have a dedicated space or home office used for playing online then you might be able to write of a percentage of your household expenses. The amount you can write off is the percentage of space used for your business in relation to the total size of your home. For example it you have a thousand square foot home and have a twenty square foot office where your online set up is, you in theory can claim two percent of your household expenses. These expenses include your rent or interest on your mortgage and property tax, heat, hydro and minor repairs. The accountant l spoke with was clear in that you must be able to show that this area of your home is strictly used for your poker playing. If you are like me and use, a laptop while sitting on your couch you may be out of luck on this one.
Other expenses worth mentioning are any research or reference material you purchase, so books, DVDs and even your subscription to Canadian Poker Player magazine are write-offs.
Any professional fess such as your accountant, lawyer and any poker seminars you may attend will be direct business expenses. Poker is a fantastic game that can provide you with a life—long learning opportunity. Even if you are a recreational player, keeping on top of the business end is a sure way to keep you in the game for a very long time with minimizing the amount you need to deposit in your bankroll, in my opinion. Not only will accurate records give you a benchmark to gauge your development, this practice will ensure that should you need to file your income to the CRA you are paying the least amount of tax possible.
Being as poker is a cash game and winning the game entails building your bankroll, it is foolish to ignore the business side of the game, it will take a little time to make this a habit but once you get a system it is not to overwhelming in the least. Next article we will look at when incorporation makes sense and how to go about incorporating your poker business.
Paul Randall works as an associate from the Cambridge head office of Daniel P. Reeve and Associates Inc. —a full service financial firm found at
www.millionaireinyou.com. Paul can be reached at paul@dprfinanciaI.com
