What Your CPA Wants You to Know
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What Your CPA Wants You to Know
111. Tax Updates: Gambling Income, Marketplace Insurance, & Homeschool Credits
We unpack how gambling wins turn into taxable income even when you net a loss, why Oklahoma’s rules are especially harsh, and how marketplace health credits can trigger surprise paybacks. We close with a Texas update on tax-related credits for nonpublic education.
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So again, this can it doesn't sound like a big deal because you're like, well, I only made like 200 bucks. No, you didn't actually. You what happened really is you made 20,000 and you lost eight, you know, nine nineteen thousand eight hundred. And so you feel like you only made two hundred. But the way the forms are reported, you made twenty thousand. They're only gonna let you take a loss against that of 18,000. So you're still gonna have to report$2,000 of income no matter what. Welcome to What Your CPA Wants You to Know.
SPEAKER_00:Tax and accounting help can be expensive. So we've created this podcast to help guide you through it all and make you feel like you have a CPA in your back pocket.
SPEAKER_01:I'm Carson Sands.
SPEAKER_00:And I'm Taryn Stands.
SPEAKER_01:I'm a CPA with over 10 years of experience helping people start and grow their businesses.
SPEAKER_00:And I'm an MBA with a specialization in marketing and entrepreneurship. Taxes suck, and we want to make sure you don't pay more than your fair share.
SPEAKER_01:We're here to share everything your CPA wants you to know.
SPEAKER_00:In a fun and easy to understand way.
SPEAKER_02:Let's get started.
SPEAKER_00:Let's do it. Good morning. It's Saturday morning for us, and we are gonna knock out some podcast episodes today. But today we are just gonna break down three important tax updates that maybe not be so interesting, but if this applies to you, they're big ones, and we've seen how it can impact you if you don't know about them. So definitely listen up if this applies to you.
SPEAKER_01:Okay, so the first thing I want to talk about is gambling income. A lot of our clients do some gambling and we are not morally opposed to it. I really don't care either way. But the problem is that the tax treatment for it is becoming less and less favorable over time. So the first part I want to talk about with the gambling is that in case you don't know, normally you report your gambling income and you do have to report it because it all gets reported to you on a W2G, which is just the form that the casino gives you.
SPEAKER_00:And let's just make it clear for people that don't know. If you go somewhere, like in Texas, everyone drives to Oklahoma and they play at Winstar, and if you win money, you're gonna get this form.
SPEAKER_01:For sure. I mean, I think there's a cutoff just like there is for almost any form. You it has to be over a certain amount, but I mean, you're gonna get it.
SPEAKER_00:So And it can be, we've seen people that have like 10, and one of them's like a thousand dollars, and one of them's like two thousand. You know, it's you'll get one every time you go. So you're gonna get one of these forms if you start gambling.
SPEAKER_01:And historically, for federal income tax purposes, it's kind of okay if you make a lot on the gambling income with the with the forms and you lost a lot, it should wash out, but there's a few exceptions. So even with the old rules, then if let's say that you're not itemizing, let's say you won$10,000 only and you had at least$10,000 in gambling losses, but your other itemized deductions, which are your mortgage interest, your real estate taxes, and your charitable contributions, and maybe some medical if you had a lot of medical expenses. Those things don't add up to more than the standard deduction. So now you're still just taking the standard, even with your gambling losses. Well, the gambling losses are an itemized deduction as well. So now you really didn't get to deduct your gambling losses and you just put an extra$10,000 of income on your tax return that you didn't really make because you actually lost money gambling. So not only did you lose money at the casino, but they're making you report taxes as if you make made money. Now, if you are itemizing, historically that was canceled out because you can deduct all of your gambling losses up to the extent of your gambling winnings and offset that$10,000 of winnings with at least$10,000 worth of losses. Well, now even that rule is changing. So let's say you have crossed a hurdle, your itemized deductions outside of gambling are enough that you're already itemizing anyway. All right. Well, now you can only deduct gambling losses up to 90% of your gambling winnings. So no matter what, if you go gamble and win any money now, even if you lost as much or more than you made, which most people do, then you are still gonna have to report at least 10% of that gambling income as winnings, as earnings that you didn't actually make. It's a very stupid, stupid rule. And it makes me angry because mathematically it doesn't make sense and it's not the way the tax code is supposed to be. But that's the new law, so we need to be aware of it. So again, this can it doesn't sound like a big deal because you're like, well, I only made like 200 bucks. No, you didn't actually. You what happened really is you made 20,000 and you lost eight, you know, nine nineteen thousand eight hundred. And so you feel like you only made two hundred. But the way the forms are reported, you made twenty thousand. They're only gonna let you take a loss against that of eighteen thousand. So you're still gonna have to report two thousand dollars of income no matter what.
SPEAKER_00:This seems very specific, but we have a lot of gambling income come through on people's tax returns, and they just don't know how it works like at all. And so we've already had some issues with like trying to explain like this is how it's going. But now think about this like everyone's gonna be paying a lot of taxes and they just don't understand it already. So that plus a lot of people don't itemize with how high the standard deduction is now.
SPEAKER_01:Right. And that's that's true. That happens to a lot of people, but even when they are itemizing, and hopefully at least that will be fixed, more people will probably itemize, especially in our state, because even though we don't have income tax, so that makes it hard to hit that state sales tax deduction. We do have the property taxes. Now, whether it's for income tax, state income tax, or property taxes, that was capped at 10,000 for a while. That is going up to 40,000 this year. We talked about that on another episode. So that increases the chances that people will be itemizing again. But nevertheless, you will have to report some of your gambling winnings even if you didn't make any money now. That's the new rule.
SPEAKER_00:So gambling's gonna cost you even more money than it did before.
SPEAKER_01:Yes. And now I do want to make an extra note for people gambling in Oklahoma. Now, gambling is illegal in Texas where we are, but we're surrounded by every state that touches us, except maybe Arkansas has legalized gambling. You know, we have Louisiana, Oklahoma, and New Mexico. But the worst of those, the worst offender is Oklahoma. I would highly recommend that if you are going to gamble, don't go to Oklahoma because they've changed their state tax law where you can only take itemized deductions up to$17,000. I mean, and plus some charitable on top of that. But as far as your mortgage interest, your real estate taxes, and your gambling losses, you can only go up to$17,000. So what does this mean? It means that we've had multiple clients now that make a hundred thousand in on the slots, sort of, but not really. They never even really cash it out. They actually didn't make any money at all. Or they make 200,000. I mean, we've seen big numbers, and it seems like, oh, I don't gamble that much. But really, if you sit there and you win and you lose and you win and you lose all day, each of those winnings adds up on your W-2. And so you might cash out almost nothing or less than you put in, but you still actually made money. So for the state laws, now not only for the federal purposes do you have that 10% of your winnings that you have to report even though you didn't make money, but in the state of Oklahoma, you can only deduct at best$17,000 of that. So for state taxes, and yes, even if you don't live there, you have to pay taxes on your gambling winnings from Oklahoma. You might end up paying tax on a hundred thousand, two hundred thousand minus just the seventeen thousand dollar deduction times, you know, whatever the income tax rate is for that state. So, you know, just as kind of a general rule, I would beg you go anywhere else. Go to Nevada, go to Louisiana or New Mexico or pretty much anywhere else, but please don't go gamble in Oklahoma. They are screwing you over even worse than the other casinos.
SPEAKER_00:As you can tell, Carson is very passionate about this subject.
SPEAKER_01:Oh, I'm mad. I think this is criminal. I think that really we should have the Supreme Court come in and disallow this.
SPEAKER_00:But the problem with this and any tax law that people don't really understand very well or haven't looked into because who would? It's boring. It's just kind of like they they set it up and then you get screwed because you just don't know about it, you have no idea, and you've already done it and you didn't plan for it.
SPEAKER_01:Well, that's their plan. And I wouldn't be surprised if Oklahoma does change this law. They tried to and it didn't go through. But I think they're doing this on purpose because what will happen is it will take two or three years before people really realize what's going on and start going somewhere else. And by the time that happens, the casinos, they're very powerful in Oklahoma. They have so much money to bribe, I mean, uh donate to campaigns, and they will get the politicians to change it so that people will come back and gamble there. But in the meantime, Oklahoma's gonna make money hand over fist on money that people didn't even earn.
SPEAKER_00:Right. They're gonna make a lot of money, and then finally people will understand what's happening and get pissed off, and it may change.
SPEAKER_01:Yeah. So please don't gamble there.
SPEAKER_00:Let's move on to the next subject. Carson could go on all day about this.
SPEAKER_01:Oh, yeah. Okay, be honest. How's your bookkeeping going?
SPEAKER_00:If you just cringed a little, this is for you.
SPEAKER_01:We created a monthly accounting program where you hop on a one-hour call with us every month to tackle bookkeeping, tax planning, business decisions, basically anything you need.
SPEAKER_00:The best part of this is it's at a reduced hourly rate, so you can easily budget for your accounting help. And because we love our clients, we throw in a free annual tax projection so you're prepared every April 15th.
SPEAKER_01:Our clients love this plan. It's perfect if you're doing your own books, but want an expert watching over your shoulder and training you on everything you need to do.
SPEAKER_00:We have all the fine details in episodes 101 and 102 of this podcast if you want to check it out, or just email us at Carson at Sansco.net.
SPEAKER_01:Now back to the show.
SPEAKER_00:This next one that we're gonna talk about is also something that I feel like people don't truly understand. And then when we go to file their tax return, you kind of have to explain everything to them. So now there's even more updates. So we're gonna talk about the health marketplace insurance.
SPEAKER_01:Yes. So the tax component of this isn't as much of an update as the other part of the health insurance. So if you're on marketplace insurance, the premiums are going up at least 26%. And that's assuming they renew the extended credits and benefits, which if they don't, then your premiums will probably double. That that's the average. Now, if you're very, very low income, that might not affect you nearly as harshly. Uh, but if you're over 400% of the federal poverty level, it might affect you even more than that, because that's an average. So why are we talking about this? I'm not an insurance agent, but it is tied to the tax return in some ways, and a lot of people aren't aware of it. So I want you to be aware that starting in 2026, your premiums could be much higher. Now you might not feel it. And this is where the tax component comes in. The entire time that the Affordable Care Act has been in effect and people have had marketplace insurance, they've offered this credit, and you can get what they call the advanced premium tax credit. Just meaning that you're gonna get a credit on your tax return for that health insurance, but they're gonna give it to you in advance so that your monthly premiums will be lower.
SPEAKER_00:And the price they show you is with that credit.
SPEAKER_01:Right. And it seems great. And if you're actually eligible for the credit, that's fine. There's no reason that you should pay all that money in all year and then get a big refund at the end of the year. That's just, I mean, especially because we're talking about people that are between 100% and 400% of the federal poverty level, people that don't necessarily have a lot of extra money every month. Okay, so it's good in theory. The problem is a lot of our clients are self-employed, or even the ones that have W-2 jobs, they get promotions, they get raises. So all of a sudden, you go from in that donut hole that they called it for so many years, very obnoxiously, I must add, but you're in the donut hole, which is 100% to 400% of the federal poverty level, and then you go over it. Now what happens? Now you don't get that credit, but you were already receiving it all year as reduced premiums. Well, what does that mean? Did they just say, oh, well, next year you won't get any more? Nope, that would be really too smart. So what they do instead is they make you pay it back. So you go to file your tax return, your tax projections were great, you worked with your CPA, that was all well and good. But what you didn't know, what you didn't tell the CPA is that you have this crappy insurance plan, and now you have to pay back all of those premiums that they paid for you. Whether you were paying, you know, 0% of that premium and they were covering it all, or 25% of it and they were covering 75%, it doesn't matter. The point is you have to go back and repay the government for all of that credit. Now, with the changes they're making, this could affect people even more because there's a lot of people that even if they don't get an increase in their income this year, because of the if they if they don't extend the enhanced benefits of Affordable Care Act, then you're gonna end up in a situation where you have to pay this back. So you need to keep an eye on it. And it's the reason why I say if you can afford it at all, even if you do the marketplace insurance, don't get the advanced credit for it. Go ahead and pay the full amount. And if you are eligible for it, do get that refund at the end of the year. If if you're a hundred percent sure you'll be eligible for the advanced credit, that's fine. I mean, I don't want you to, you know, put yourself in a hard position every month just to get a refund at the end of the year. But really, if you don't know, if your income fluctuates, if you're self-employed, or you may or may not get a raise, or you may or may not have a lot of overtime and cross over that threshold, don't risk it. You're gonna end up having to pay all of that back and it hurts.
SPEAKER_00:It's getting to the point where if I see a 1095A in someone's tax document, I cringe a little bit because I'm just like, it's happened so many times where people get mad because they owe all this money, and then Carson has to explain to them where it's coming from, and they had no idea. And sometimes it's not someone got a raise, it's that they pulled money out from a retirement account or something because they needed it and they were in a hard place, and then that made their income go up. Oh, okay. And they're no longer qualified. So then they owed$12,000 that they don't have.
SPEAKER_01:Right. And they already had to pay 10% penalty on those retirement funds that they pulled out early, plus the tax on those retirement funds, and now they have to pay all of their premiums back. And it's like, whoa, you ended up basically using all of your retirement just to pay the government.
SPEAKER_00:Absolutely. It's just a horrible deal. Let's just I don't know. I every time I see it, I'm just like, this is horrible.
SPEAKER_01:I know. And and just in case y'all don't know what the 1095A is, ooh, I get to catch Taryn on a jargon. Why I say you you said 1095A, some people don't know what that is.
SPEAKER_00:Oh, that's true.
SPEAKER_01:Ooh, I got her. She always gets me for that. So that's the form they send you at the end of the year if you were on marketplace health insurance. And the system is so tied together, even though this seems like insurance, it's so tied together with your taxes that if you had that form and you forgot to give it to me or didn't even know it existed, then when I go to e file your tax return, it won't let me. It will just automatically say, oh no, there's this person has a 1095A and you didn't report it in their tax return. So that's how much all of this insurance and tax is tied together. And it's why we're talking about it. Because I'm not an insurance agent. And that's the reason so many of my clients, even the ones that prepare and do tax projections and do planning with me, they don't even know they need to tell me that they switched to this marketplace insurance because they're like, well, he's not my insurance agent. I've already talked to my insurance agent and he got me on this great plan. Your insurance agent doesn't understand this because it's tax, and it's not his fault or her fault either. The government made it so complicated that you almost have to be an insurance agent and a CPA to even understand what the heck's going on with all this.
SPEAKER_00:It's kind of like the same thing with the gambling. You just don't know the law and then you pay for it later.
SPEAKER_01:And that's why we want to talk about it. We got you. We want you at least be aware it's coming. And if you can, please try not to get the monthly premiums in advance paid by them if they pay it. You you won't be disqualified from the credit. If you don't take the advanced ones, you'll get that credit on your tax return and it will all come back as a refund or as a reduction to other taxes that you owe.
SPEAKER_00:I'm just gonna say this has just been a riveting episode so far.
SPEAKER_01:It's it's designed to scare you into making good choices. That's that's our job sometimes.
SPEAKER_00:So, so boring. Some of the business stuff we obviously love and geek out over, but this is awful. This is rough. But we have one more for you, and we'll make it quick, I promise.
SPEAKER_01:And this one is more specific to Texas. And we try not to do a lot of state things because first of all, we don't even have income tax here. And also, you know, we broadcast this for everyone, and it's mostly federal tax stuff.
SPEAKER_00:Right. It's mostly federal tax. So if you don't live in Texas, you can turn this off, listen to a different podcast.
SPEAKER_01:But you might have similar credits in your state, and hey, uh it's so fun listening to us talk about taxes. So you can keep listening if you want. But for people in Texas, there are going to be new homeschool credits. You should look into them, read on the details. But in general, if you and this, oh, it's not just homeschool, by the way. It could also be for private school or for what are what are they called? Voucher schools or charter, all of those things. So this money can go towards those, but it's it's a reduction of your property taxes. It's it's a credit that comes out of property taxes for people that are not in public school. And it it's just a way of saying, okay, the public school isn't working for you, you're having to pay for this thing, we're gonna help offset that sum. Now there are priorities. It is income-based. The first round of the money, because I believe there's two billion dollars, the first bit of that money goes to uh special needs children, and that's regardless of your income. So if you do have special needs kids, even if you're very wealthy, you might still look into this, you could get a little bit of a tax break. Um, the next thing is uh people that are below a certain income threshold. So that threshold is gonna move along with inflation and different things. So you're gonna need to look at what that is each year. But in general, if you're below that threshold, you're in the second round of money after all the special needs children. Uh, your kids can get access to that$2,000 to help pay for things. And then after that, it opens up to basically everyone else. If there's any money left, then you apply and it's kind of on a first come, first serve basis. So I wanted all of our listeners to hear this so that you'll be the first ones to sign up. If you're not in one of those first two groups, there might not be any money left, but hopefully there will be some and we can get some of our wonderful property tax money back.
SPEAKER_00:All right. I think that wraps it up. I think that's all we can handle for today.
SPEAKER_01:Well, if you're still awake, thank you so much for listening to What Your CPA Wants You to Know podcast.
SPEAKER_02:This podcast is intended to provide accounting and tax information for educational purposes only. All tax situations are unique and should be handled with the assistance of a tax professional.