Published in Bluff
March 2008

Taking Control of Your Future

Turning your poker playing into Retirement



It’s fun to be an accountant and a poker player. I get to talk to other players and they often confide in me about how much profit they have made playing poker. When they find out I am a CPA and want tax advice, I usually get the “real” numbers as opposed to the bragging at the table or to their buddies.

There are a lot of really young poker players out there making a lot of money. Some of the younger guys can’t play poker in a brick and mortar in the US because you they are under 21. A large majority of players are under 25 and are millionaires. A lot are in college and playing for fun but making more money than their parents can even believe.

None of us know what will happen with poker. We know that there are a lot more players out there, and the competition is much stiffer than it used to be. As written in an article several years ago, a young player can actually see more poker hands than Doyle Brunson has seen in his lifetime, thanks to the Internet. My younger clients know that they can make more money playing on-line for 5 hours than they can make waiting on tables for a week while they are in college. But, will it last? Will it stay as profitable 5 years down the road? Who knows? But I do know this. The younger you are when you put money away for retirement and do not touch it, the richer you will be when you are 59 ½ (the age when you can take it out without penalties).

My challenge as a CPA for poker players is to try my best to get these guys to put money away in retirement. This is easily done if I can make their poker playing a business. Most players don’t realize that they can put away up to $45,000 (for 2007) per year into a retirement account if they are a business, depending on their net income. Contributing to a retirement plan dramatically reduces the taxes due to the IRS and instead allows the player to keep more money for their future.

I am fortunate to have clients that listen to me in that respect. I try not to be too much of a mothering-type. There is always a balancing act between blowing money and saving for the future.

The IRS will let you put away 20% of your profit (after the self-employment tax deduction), up to $45,000 for 2007. Let me give you a real example. You are 23 years old and made one contribution of $45,000 into a SEP IRA. If you conservatively invest this at 8% interest and do not add another penny to it, by the time you are 60, you will have approximately $780,000. That is a lot of money for only one contribution. To show how crazy this can get, if you contribute $45,000 per year for 37 years into a SEP IRA at 8%, you will have approximately $9,800,000 when you are 60 years old!!

Now, how can this save you taxes? The $45,000 is subtracted from your taxable income. If you are single and are making a net income of over $350,000, you are in the 35% tax bracket for Federal. By putting away $45,000 into retirement, you save $15,750 that you will not have to give Uncle Sam. There are other savings that come along with this but they are too complicated and boring to discuss.

So, the fact is this. If you are making money playing poker as a business, even $2,000 into a retirement plan is better than nothing. You can sit back for the next 30 or so years and watch your money grow without doing a thing.

Remember, save for a rainy day – I promise you, it will rain! Good luck at the tables.


Ann-Margaret Johnston is a practicing CPA in Cumming, Georgia. She is the author of the recently published book titled “How to Turn Your Poker Playing Into A Business”. Her website is www.pokerdeductions.com where you can find answers to commonly asked poker tax questions.



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