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Consider two taxpayers who enjoy gambling; both are single and residents of Colorado. Both are amateur gamblers who earn $100,000 of wage income and rent. Joe Unlucky broke dead even in his gambling, winning $299,000 (using the session method) and losing $299,000. When he files his 2022 tax returns, he has a federal refund of $3,238 and a Colorado refund of $490.
Larry Lucky fared a little better: He had $301,000 of gambling winnings and $301,000 of gambling losses. When he files his 2022 tax returns, he has the identical federal refund of $3,238. However, he owes Colorado a whopping $11,632. What caused Larry to have a ridiculous marginal tax rate of 606.1% on the additional $2,000 of gross winnings?
For 2022, Colorado implemented a $30,000 reduction in itemized deductions for taxpayers whose Adjusted Gross Income exceeds $400,000 and who itemize their deductions. (The reduction is $60,000 if married filing jointly.) Larry faced this; Joe didn’t. Larry ends up with that 606.1% marginal tax rate on $2,000 of “winnings!” Remember, Larry broke even so he really didn’t win anything.
Premium Human Resources Solutions
Taxes in the Back | taxdood discusses contemporary tax issues, often those facing poker players or the casino industry, and spri
Home Page | Clayton Financial and Tax