Congratulations to this year’s winners at the World Series of Poker, run by Harrah’s, and hosted at the Rio Hotel & Casino in Las Vegas. The Main Event, the World Championship of Poker, has just been completed. This year, 6,358 contestants ponied up $10,000 each to enter the event. The total prize pool was $59,784,954 and is the largest prize pool in a sporting event held in the United States.
Jerry Yang, of Temecula, California won $8,250,000. That’s what you will read on the Internet and in tomorrow’s newspapers. But did he really win all of that money?
Well, that was his gross win. However, there’s the matter of taxes. Tournament poker falls under other gambling in the tax regulations, so withholding is required if the win is both more than $600 and at least 300 times the entry fee. So first through third place must have 25% of the prize withheld for US taxes (unless a tax treaty overrides this provision).
Mr. Yang, hailing from California, had $2,062,500 withheld to the IRS right off the top of his prize. Given the marginal tax rate he will likely face, he will probably owe another $825,000 in federal taxes (a total of $2,887,500 to the IRS). He will also California tax, so the Franchise Tax Board figures to rake in $849,750 of the win. Mr. Yang’s actual win is probably $4,512,750 or so. The Franchise Tax Board is especially grateful. This is the second year in a row that a Californian has won, and given California’s budget issues, any and all revenues will be quickly spent.
Tuan Lam of Mississauga, Ontario finished second. He won $4,840,981 for his efforts. Under the US-Canada tax treaty, he had $1,452,294 withheld. He may be able to get some of that back, if he can show other gambling losses. He also faces Canadian tax on his win–as a professional gambler, his winnings are taxable under Canadian law. Luckily for Mr. Lam, he will likely not owe any Canadian tax because he will probably get a credit for the US tax paid (at 30%) on his Candian tax return (a tax rate of 29%).
Raymond Rahme of Johannesburg, South Africa, finished 3rd and earned $3,047,025. He’s the luckiest winner. He faces no US withholding per the US-South Africa tax treaty. He’s also an amateur, and it appears he does not owe any tax under South African law.
Alex Kravchenko of Moscow, Russia, finished 4th and walked away with $1,852,721. Like Mr. Rahme, the US-Russia tax treaty allows him to head home with all of his funds. Russia has a 13% flat tax, so he will probably owe about $240,854.
The other final table participants owe tax to Inland Revenue (United Kingdom), the IRS, and two state tax agencies (Virginia Department of Taxation and the New York Department of Tax & Finance). Here are the totals for the various agencies:
| Amount won at Final Table | $22,019,901 |
| US Tax Withheld to IRS | $3,514,794 |
| Add’l Tax Owed to IRS | $1,611,510 |
| Total Tax to IRS | $5,126,304 |
| Tax to California FTB | $849,750 |
| Tax to Inland Revenue (UK) | $712,402 |
| Tax to State Taxation Service (Russia) | $240,854 |
| Tax to NY Dept of Tax & Finance | $65,503 |
| Tax to VA Dept of Tax | $40,198 |
| Total Taxes | $7,035,011 |
That’s a total tax bite of 31.95%.
So congratulations to the winners. Just remember that a big winner—perhaps the biggest winner of all—is Uncle Sam. Because we all know, the house always wins.
Tags: WSOP