Nine individuals came to Las Vegas early this week to compete for the championship at the World Series of Poker (WSOP). Who would be the lucky winner? And who really got to keep the money?
This year’s World Series of Poker concluded earlier this morning at the Rio Hotel and Casino in Las Vegas. The winner of the main event won $8,531,853…but that was before taxes.
Congratulations to Gregory Merson of Laurel, Maryland. He beat Jesse Sylvia in the longest final table in WSOP main event history. The three-handed play lasted 11 hours. In the end, Mr. Merson’s king-five beat Mr. Sylvia’s queen-jack for the title.
Mr. Merson had tremendous success at the WSOP this summer. He also won the $10,000 buy-in six-max no-limit hold’em event (there are a maximum of six players at each table throughout the event). Most poker professionals consider that event to be one of the toughest (if not the toughest event) of the WSOP. He earned $1,136,197 for his earlier victory. Mr. Merson won “Player of the Year” honors at the WSOP.
For his win in the main event, Mr. Merson earned $8,531,853. He’ll owe self-employment tax ($247,424), state income tax to Maryland ($469,252), and federal income tax ($2,976,850), for a total tax bite of $3,693,526. He’ll actually get to keep $4,838,327 (he’ll lose an estimated 43% of his winnings to taxes).
Finishing second was Jesse Sylvia, a professional poker player from Las Vegas. Mr. Sylvia earned $5,295,149 for his second place finish. Mr. Sylvia doesn’t have to worry about state income taxes (Nevada does not have a state income tax). He will owe an estimated $1,967,176 to the IRS (a 37% tax rate).
Jake Balsiger, a student at Arizona State University in Tempe, finished third. Mr. Balsiger was hoping just to place “in the money” in the event. He did far more than that. He entered the final table in eighth place and played quite well to finish in third. I imagine the $2,379,932 he won will make him quite popular at ASU. As an amateur gambler, he won’t owe self-employment tax; however, he will have to pay Arizona state income tax. Overall, he’ll lose an estimated $1,419,141 to taxes (37%).
Finishing fourth was Russell Thomas of Hartford, Connecticut. Mr. Thomas, an actuary, earned $2,851,537 before taxes. Between federal and Connecticut income taxes he’ll lose and estimated $1,093,363 (38%) of his winnings.
Jeremy Ausmus, a professional poker player from Las Vegas, finished fifth. Mr. Ausmus started the final table with the fewest chips but was able to move up four spots, earning $2,155,313. Mr. Ausmus was the only married participant at the final table; in fact, his wife had just given birth a month ago to their second child. As a professional poker player, he does owe self-employment tax on his winnings; he’ll also owe federal income tax. He’ll lose an estimated $785,552 (36%) to taxes.
Finishing sixth was Andras Koroknai of Debrecen, Hungary. Mr. Koroknai was the only non-American at this year’s final table. Mr. Koroknai likely gave thanks to the diplomats and politicians of Hungary. The US-Hungary Tax Treaty exempts gambling winnings from withholding. Additionally, Hungary currently doesn’t tax gambling winnings. Thus, Mr. Koroknai will keep all of his $1,640,902 of winnings.
Michael Esposito, a commodities broker from Seaford, New York finished in seventh place. He only plays poker “a couple of times a year.” His winnings of $1,258,040 should allow him to play more often if he wants to. He will have to pay federal and state income tax; I estimate he’ll owe $418,179 in taxes (33%).
Robert Salaburu of San Antonio, Texas was the eighth place finisher. Mr. Salaburu is a professional poker player and earned $971,360 before taxes. Texas, like Nevada, doesn’t have a state income tax; thus, Mr. Salaburu will only owe federal income tax and self-employment tax. I estimate he’ll lose $349,204 to taxes (36%).
Steve Gee of Sacramento, California finished in ninth place. Mr. Gee is also a professional poker player. As a Californian, he will owe state income tax along with self-employment tax and federal income tax. Because of California’s high tax structure, he has the second-highest burden in tax (by percentage) of the final table participants. I estimated he’ll lose $302,255 in taxes (40%).
Here’s a table summarizing the tax bite:
| Amount won at Final Table | $27,258,025 |
| Tax to IRS | $9,061,296 |
| Tax to Comptroller of Maryland | $469,252 |
| Tax to Connecticut Dept. of Revenue Services | $178,375 |
| Tax to Arizona Dept. of Revenue | $171,383 |
| Tax to New York Dept. of Taxation & Finance | $97,169 |
| Tax to California Franchise Tax Board | $50,521 |
| Total Taxes | $10,028,396 |
That’s a total tax bite of 36.79%.
Here’s a second table with the winners sorted by their estimated take-home winnings:
| Winner | Before-Tax Prize | After-Tax Prize |
| 1. Gregory Merson | $8,531,853 | $4,838,327 |
| 2. Jesse Sylvia | $5,295,149 | $3,327,973 |
| 3. Jake Balsiger | $3,799,073 | $2,379,932 |
| 4. Russell Thomas | $2,851,537 | $1,758,174 |
| 6. Andras Koroknai | $1,640,902 | $1,640,902 |
| 5. Jeremy Ausmus | $2,155,313 | $1,369,761 |
| 7. Michael Esposito | $1,258,040 | $839,861 |
| 8. Robert Salaburu | $971,360 | $622,156 |
| 9. Steve Gee | $754,798 | $452,543 |
| Totals | $27,258,025 | $17,229,629 |
While Andras Koroknai finished in sixth place, thanks to not owing taxes on his winnings he effectively finished in fifth place. It’s always nice when your after-tax income equals your before-tax income.
Yet there really was a different winner this year: the Internal Revenue Service. The IRS will get an estimated $9,061,296 in tax from the final table. That’s more than the first place money of $8,531,853. It’s nearly double the after-tax winnings of the first place finisher! While I can’t envision the crowd at the Penn & Teller Theater at the Rio Hotel cheering for the IRS, it was the IRS that was the big winner this morning. That’s because the house always wins.
Any idea of how much the Rio (or Caesars Entertainment Corporation) collected in rake, fees, service charges, mandatory tokes etc.?
As a pro, you can deduct all reasonable business expenses to earn these funds.
Depending on their lifestyle’s and amount of tournament buyins throughout the year, this will reduce the taxes paid.
Interesting post! Media reports are that the third place winner, Balsiger, sold 80% “action” before the entering the main event. I’m not a poker pro, so I’m not really familiar with how this works, but my understanding is that someone else has claim to 80% of the winnings. If that is the case, how would that affect the tax of the winnings? If lots of different people bought action, would the income be taxed at a lower effective rate if it is spread out over enough people, or would it be taxed at his level first and then distributed to the others (not to be taxed again)? He said many people had bought action, I think, so if it was 10-20 people, that would spread it pretty thin. Just curious what your thoughts might be on that.
Many of the players were backed. US tax law is that everyone is taxed on their own income, so if (say) Balsiger only had 20% of himself, his income would only be 20% of the amount I showed. Unless I know with 100% certainty about backing, I don’t report it.