Nine individuals came to Las Vegas over the last three days 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 winner’s tax burden was nearly ten percent less than the second place finisher. Why? As my mother would say, “Location, location, location.” There are good tax states and bad tax states. Las Vegas may not have the beauty of the San Francisco Bay Area, but you sure do pay a lot in state taxes for living in California.
One other note: I do need to point out that many of the players in the tournament were “backed.” Poker tournaments have a high variance (luck factor). Thus, many tournament players sell portions of their action to investors to lower their risk. It is quite likely that most (if not all) of the winners were backed and will, in the end, only enjoy a portion of their winnings. I ignore backing in this analysis. Now, on to the winners.
Congratulations to Qui Nguyen of Las Vegas for winning the 2016 World Series of Poker Main Event. Mr. Nguyen won $8,005,310 for the victory. Mr. Nguyen defeated second place finisher Gordon Vayo after a grueling eight hour heads-up battle. Mr. Nguyen is a professional gambler, combining poker playing with baccarat; he’ll owe self-employment tax and federal income tax; because Mr. Nguyen resides in Nevada he doesn’t have to pay state income tax. I estimate Mr. Nguyen will lose only 41.51% of his win ($3,323,157) to tax. That’s the second-lowest tax hit of any of the Americans at the final table.
Gordon Vayo of San Francisco was in some ways the biggest loser. Yes, he finished in second place and earned $4,661,228. However, that was before taxes. Mr. Vayo may have left his heart in San Francisco, but because he resides there he’s leaving a lot of money to California’s Franchise Tax Board. Indeed, Mr. Vayo is losing an estimated 51.46% of his winnings to federal and state tax ($2,398,800); his net winnings are just $2,262,428. He will pay California’s top tax rate of 13.30%, on top of self-employment tax and federal income tax. Mr. Vayo is only the second individual since I’ve been writing these summaries to lose over half his winnings to taxes.
In third place was Cliff Josephy of Syosset, Long Island, New York. Mr. Josephy came into the final table with the chip lead, but fell to third place. Still, he takes home $3,453,035 before taxes. Unfortunately, New York is not a low-tax state; Mr. Josephy loses an estimated 48.50% of his winnings ($1,674,568) to federal and state tax. This isn’t as bad as California, but it’s certainly not as pleasant as here in Nevada.
Finishing in fourth place was Michael Ruane of Maywood, New Jersey. Mr. Ruane earned $2,576,003 for his placing fourth; however, that was before federal and New Jersey income tax. The professional poker player loses an estimated 45.75% of his winnings ($1,178,525) to tax. Because of the impact of taxes, Mr. Ruane finished in sixth place based on after-tax winnings.
Vojtech Ruzicka of Prague (Czech Republic) finished in fifth place. Mr. Ruzicka was one of the two luckiest players from a tax perspective: the US and the Czech Republic have a tax treaty exempting his winnings from withholding by the IRS and the Czech Republic has a flat 15% income tax. Only $290,293 of Mr. Ruzicka’s $1,935,288 in winnings will go toward taxes. While Mr. Ruzicka finished in fifth place based on pre-tax winnings, he ends up in fourth place based on after-tax winnings.
Kenny Hallaert of Hansbeke, Belgium was a big winner in spite of finishing in sixth place. Mr. Hallaert is a poker tournament director in Belgium. Belgium does not tax gambling winnings of non-professional gamblers, so Mr. Hallaert’s pre-tax winnings of $1,464,258 are also his after-tax winnings! Even better, the US-Belgium Tax Treaty exempts gambling winnings, so Mr. Hallaert doesn’t owe any US income tax. Even though he finished in sixth place, his after-tax winnings put him in fifth place.
Griffin Benger, a professional poker player from Toronto, Ontario, Canada, finished in seventh place. The tax situation in Canada for gambling remains fluid. The Canada Revenue Agency (the Canadian equivalent of the IRS) believes that gambling winnings for professional gamblers should be taxed. However, Canadian courts have generally disagreed; thus, today Mr. Benger does not owe any tax to Canada. However, 30% of his $1,250,190 in winnings ($375,057) were withheld for US income tax. Mr. Benger can file a US income tax return (Form 1040NR) to recover gambling losses up to the amount of his gambling winnings.
In eighth place was Jerry Wong of South Florida. The Brooklyn native earned $1,100,076, but that’s before taxes. He’s a professional gambler, so he will owe self-employment tax along with income tax. However, as a Floridian he avoids state income tax. I estimate he will lose $419,776 (38.16%) to tax.
Fernando Pons, an account executive who resides in Palma, Spain, finished in ninth place. Spain taxes its residents on their gambling winnings no matter where the winnings are won. And Spanish tax rates make the US look good: Mr. Pons will lose nearly 45% of his $1,000,000 of gross winnings to tax.
Here’s a table summarizing the tax bite:
| Amount won at Final Table | $25,445,388 |
| Tax to IRS | $8,108,024 |
| Tax to Franchise Tax Board (California) | $623,262 |
| Tax to Agencia Tributeria (Spain) | $449,584 |
| Tax to New York Dept. of Taxation and Finance | $422,752 |
| Tax To Finanční Správa (Czech Republic) | $290,293 |
| Tax to New Jersey Division of Taxation | $215,845 |
| Total Tax | $10,109,760 |
That’s a total tax bite of 39.73%.
Here’s a second table with the winners sorted by their estimated take-home winnings:
| Winner | Before-Tax Prize | After-Tax Prize |
| 1. Qui Nguyen | $8,005,310 | $4,682,153 |
| 2. Gordon Vayo | $4,661,228 | $2,262,428 |
| 3. Cliff Josephy | $3,453,035 | $1,778,467 |
| 5. Vojtech Ruzicka | $1,935,288 | $1,644,995 |
| 6. Kenny Hallaert | $1,464,258 | $1,464,258 |
| 4. Michael Ruane | $2,576,003 | $1,397,478 |
| 7. Griffin Benger | $1,250,190 | $875,133 |
| 8. Jerry Wong | $1,100,076 | $680,300 |
| 9. Fernando Pons | $1,000,000 | $550,416 |
| Totals | $25,445,388 | $15,335,628 |
While Michael Ruane finished in fourth place, he ends up in sixth place on an after-tax basis (passed by both the fifth and sixth place winners). While taxes may be the price of civilization, the price in the United States is high.
As usual, the IRS finished in first place: The $8,108,024 that the IRS will receive exceeds the first place prize of $8,005,310. That’s because we all know that the house (the IRS) always wins.