I believe that the simplest way to avoid the tax problem is to minimize W2-Gs even when using the same volume of coin-in and with the same expected value (EV). For instance, play 100P JOB 5-cent (@ $25 per hand) or 10P JOB 50-cent (@ $25 per hand) - instead of single line JOB $5 (@ $25 per hand). Much less likely to generate a W2-G in either of the first two cases because even 5 royals on 100P 5-cent or one royal on 10P 50-cent will not be over $1K - but the results are statistically the same. In this example, on multi-line play, only a dealt SF or royal will generate a W2-G. Much less likely to occur for the same volume of play.
Walter H
Another issue, say you win $10,000 one year and lose $5,000 the next two years. You just broke even, the $10,000 that first year was just dumb luck. But you get to pay taxes on the phantom $10,000 gain but get no carry forward losses on your losing years (like you would in stocks or cryptocurrency for example). Gambling losses cannot be used to offset other gains and cannot be carried forward to other years. After taxes you are actually a loser instead of the breakeven you thought you had. One way around this problem, to some degree, is to make sure you play at least Nzero (variance/edge/edge) hands per year, at least you substantially reduce this no loss carry forward penalty for gambling. At Nzero hands your odds of winning are about 84% with a 16% chance of losing (even though you have a "long term" edge). Dunbar generated a table of Nzero values at west-point.org/users/usma1955/20228/V/Bank_NO1.htm
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Posted by: Walter Hamilton <walterhnri@aol.com>
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