Professional gambler taxes: navigating state returns and W2G's

As a tax professional who's worked with several professional gamblers, I can help clarify this situation for you. Yes, you generally need to file a non-resident state tax return in each state where you received a W2G or earned gambling income. Each state has different rules, but most require you to report the income earned within their borders. For professional gamblers filing Schedule C, you'll need to allocate your gambling expenses proportionally across the states where you earned income. Your records will be crucial here - you'll allocate based on the percentage of income earned in each state compared to your total gambling income. For Nevada, you're right that there's no state income tax, so you don't need to file a state return there. However, you still need to account for that income on your federal return. States like New Jersey, Pennsylvania, Michigan, and Illinois will require non-resident returns (except Illinois, which would be your resident return). You'll report the W2G income from each state on their respective returns, along with the proportional share of your expenses.

I spent years trying to figure out the nightmare of multi-state gambling returns until I found https://taxr.ai - they specialize in analyzing gambling tax documents and properly allocating revenue and expenses across states. Their system automatically calculated my state-by-state breakdown and told me exactly what to file where. For professional gamblers, they have a feature that helps allocate Schedule C expenses proportionally to each state based on your session logs. It saved me from making a huge mistake on my New Jersey and Pennsylvania returns last year where I was about to double-count some losses. The system flagged it immediately and helped me correct it.

I need to publicly eat my words about being skeptical of taxr.ai. After seeing the response here, I decided to give it a shot with my complicated situation involving tribal casinos and multiple states. The system immediately identified that my Michigan tribal casino winnings needed special handling and guided me through the process. It also caught that I was incorrectly allocating my travel expenses across states. Apparently I should have been weighting them based on days spent in each state rather than just dividing by the number of states. The documentation it generated for each state return was incredibly detailed, showing exactly how my expenses were allocated and why. My accountant was impressed with how thorough it was, especially for my Pennsylvania non-resident return which has always been problematic. If you're a professional gambler dealing with multiple states, this is genuinely worth checking out.

I feel your pain on the multi-state gambling returns. Last year I spent WEEKS trying to get through to the Pennsylvania Department of Revenue to clarify how they wanted me to handle my poker tournament winnings. Kept getting busy signals or disconnected after waiting on hold for hours. I finally discovered https://claimyr.com and their system connected me to an actual PA tax agent in less than 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone systems and wait on hold for you, then call you when they get a human on the line. It was a complete game-changer. The PA agent explained exactly how they wanted the non-resident gambling income reported and which specific form I needed to include with my return. I used them again for questions about New Jersey's allocation rules, and they got me through to someone who actually knew what they were talking about.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I was still struggling to get answers about my Michigan gambling tax situation. Out of desperation, I tried the service, fully expecting to waste my money. To my shock, they got me through to the Michigan Department of Treasury in about 30 minutes (I had previously tried calling for 3 days without success). I spoke with an agent who directed me to their specialist team for gambling income. The agent confirmed that Michigan does recognize professional gambler status for non-residents and explained exactly how to allocate my expenses on their non-resident form. She even emailed me their internal guidance document for professional gamblers, which isn't available on their website. The time saved and the quality of information I received was genuinely worth it. Sometimes being proven wrong is actually a good thing!

Don't forget that as a professional gambler, you also need to consider estimated tax payments for next year, especially if you're playing in multiple states. Many pro gamblers get hit with underpayment penalties because they don't realize they need to make estimated payments to each state where they have gambling income. For states like Pennsylvania and New Jersey, their estimated payment thresholds are different from federal ones. I learned this the hard way and paid nearly $1,200 in penalties across three states last year.

Another thing to consider is whether your home state (Illinois) offers tax credits for taxes paid to other states. Most states do this to avoid double taxation on the same income. So if you pay tax to Michigan on income earned there, Illinois will usually give you a credit for those taxes on your resident return. There are usually forms for this - in Illinois it's Schedule CR. This can make a big difference in your total tax burden.

This is exactly the kind of situation where keeping detailed records pays off! I've been a professional gambler for 5 years and dealt with similar multi-state issues. One thing I'd add to the excellent advice already given - make sure you're tracking which specific tournaments or sessions generated each W2G. Some states (like Pennsylvania) want to see the actual location and date of the gambling activity, not just the total amount. This becomes crucial if you're audited. Also, regarding your $78,000 total income vs $65,000 in W2Gs - that $13,000 difference needs to be carefully documented. Keep all your session logs organized by state and date. I use a simple spreadsheet that tracks: Date, Location, Buy-in, Cash-out, Net Result, and any expenses for that session. This makes the state allocation much easier. For Illinois specifically, since that's your home state, you'll report ALL your gambling income there (not just Illinois income), then claim credits for taxes paid to other states. The other states only get the income earned within their borders. One last tip: consider consulting with a tax pro who specializes in gambling taxes if your income continues to grow. The multi-state issues get complex quickly, and the penalties for getting it wrong can be substantial.

As someone who's been through the multi-state professional gambling tax maze, I want to emphasize one crucial point that hasn't been mentioned yet: make sure you understand each state's definition of "professional gambler" status. While you claim professional status on your federal Schedule C, not all states automatically recognize this. Some states treat ALL gambling winnings as "other income" regardless of your professional status, which can affect how you deduct expenses and losses. For example, I discovered that one state I filed in didn't allow me to deduct my full business expenses against gambling winnings the way federal law does. They had a cap on gambling loss deductions even for professional gamblers. This completely changed my tax liability calculation for that state. I'd strongly recommend researching each state's specific rules before filing. Some states have published guidance on professional gambling, while others require you to dig through their tax code or call their departments directly. The differences can be significant - I've seen cases where the same income and expenses result in vastly different tax liabilities depending on how the state treats professional gambling status. Also, keep in mind that your professional gambler status might need to be "proven" to each state independently if you're ever audited. Having consistent documentation across all states showing the business nature of your activities is essential.