The Real Winners of the World Series of Poker (2015 Edition)

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?

Last year the winner was London, so to speak. Most of the participants hailed from the United Kingdom (well, resided there) to save on taxes. The United Kingdom does not tax gambling winnings and the US-UK Tax Treaty exempts gambling winnings from taxation. This year, only one of the participants escaped paying tax on his winnings; he is not from the UK.

It’s back to normal this year. As you will soon see, the big winner, almost doubling the amount of the after-tax winnings of the “winner,” was the Internal Revenue Service. The IRS collected $8,467,091 out of the $24,806,976 awarded at the final table (34.13%).

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 Joe McKeehen of North Wales, Pennsylvania. The professional poker player dominated play at the final table. He came in with the chip lead and never relinquished it and never looked challenged. For finishing first out of 6,420 entrants (each of whom paid the $10,000 entry fee) he won $7,683,346. As a professional poker player, he’ll owe self-employment tax along with his federal income tax ($3,073,240), Pennsylvania state income tax ($235,879), and the local township (North Wales Boro) Earned Income Tax ($76,833), a total of $3,385,952 (44.07%). He’ll get to keep an estimated $4,297,394 of his winnings.

Finishing second was Joshua Beckley of Marlton, New Jersey. Mr. Beckley won $4,470,896 for his second place finish. His percentage tax burden is higher than the winners at 46.56%; that’s because New Jersey is decidedly not a low-tax state. Still, he’ll end up paying $2,081,719 in tax.

Neil Blumenfield of San Francisco finished in third place. In most years the 61-year old former technology executive would have been the oldest player at the final table. However, he was eclipsed this year by a 72-year old! Still, it makes me feel pretty good about my future poker prospects. Mr. Blumenfield was one of two amateurs at the table, so he’s not impacted by self-employment tax. However, he resides in California, so his tax burden is the largest of any of the Americans at 46.86%. I estimate he will keep just $1,805,764 of the $3,398,298 he won (losing $1,592,534 in tax).

In fourth place was Max Steinberg of Las Vegas. Mr. Steinberg, the only one of the nine individuals who had previously won a WSOP bracelet (for winning an event at the WSOP), is a professional Daily Fantasy Sports and poker player. He may be looking to relocate after Nevada effectively ended DFS within the Silver State. Of the individuals who owe income tax, Mr. Steinberg faces the lowest tax rate (40.99%). That’s because while he will owe federal income tax and self-employment tax (totaling $1,072,055 of the $2,615,361 he won), Nevada does not have a state income tax.

Ofer Zvi Stern of Herzliya, Israel, finished in fifth place. Mr. Stern works in the technology industry in Israel and is an amateur gambler. The US-Israel Tax Treaty does not cover gambling, so Mr. Stern loses 30% of his winnings $573,427 of $1,911,423) to the IRS. Gambling income is taxed in Israel. While Mr. Stern should get a tax credit for the tax he paid to the IRS, he’ll still owe an additional $326,679 to the Israel Tax Authority–a total tax bite of 47.09%.

Thomas Cannuli of Cape May, New Jersey, finished in sixth place. Mr. Cannuli is a professional gambler, so he owes income tax to the IRS and New Jersey and self-employment tax. While he won $1,426,283 for finishing sixth, after taxes of $640,287 (44.89%) he’ll only get to keep $785,996.

Pierre Neuville, a retired businessman from Knokke-Heist, Belgium, finished seventh. Mr. Neuville was the oldest November Nine participant (he’s 72) ever. While he finished in seventh place by pre-tax winnings, Mr. Neuville finished in fifth place by after-tax winnings. The US-Belgium Tax Treaty exempts gambling winnings from US taxation, so Mr. Neuville owes nothing to the IRS. Belgium doesn’t tax gambling winnings of amateur gamblers, so he owes nothing to Belgium. That will likely soften the blow of being the third person eliminated at the final table.

The eighth place finisher was Federico Butteroni of Rome, Italy. Mr. Butteroni only played two hands at the final table, and his second hand ended his tournament. While he won $1,097,056, he’ll only get to keep $571,566 (a tax bite of 47.90%). The US-Italy Tax Treaty exempts gambling winnings from US taxation, so none of his winnings were withheld for the IRS. However, Italy does tax gambling winnings from non-European Union countries. (There is current litigation regarding taxes owed for winnings within the E.U., but it appears that, for the present, such winnings are not subject to taxation.) The tax appears to be a flat 47.90%. Mr. Butteroni faces the highest tax bite by percentage of any of the final table participants.

Patrick Chan of Brooklyn, New York was knocked out on the second hand of the final table. Unfortunately for Mr. Chan, he did not add anything to the $1,001,020 he took home in July. He only gets to keep an estimated $545,614 of his winnings (45.49%) because he owes federal income tax, self-employment tax (he is a professional poker player), state income tax, and New York City income tax.

Here’s a table summarizing the tax bite:

Amount won at Final Table $24,806,976
Tax to IRS $8,467,091
Tax to Agenzia delle Entrate (Italy) $525,490
Tax to New Jersey Division of Taxation $493,422
Tax to Franchise Tax Board (California) $425,550
Tax To Israel Tax Authority $326,679
Tax to Pennsylvania Department of Revenue $235,879
Tax to New York Dept of Taxation & Finance $102,605
Tax to North Wales Boro $76,833
Total Tax $10,080,122

That’s a total tax bite of 42.95%.

Here’s a second table with the winners sorted by their estimated take-home winnings:

Winner Before-Tax Prize After-Tax Prize
1. Joe McKeehen $7,683,346 $4,297,394
2. Joshua Beckley $4,470,896 $2,389,177
3. Neil Blumenfield $3,398,298 $1,805,764
4. Max Steinberg $2,615,361 $1,543,306
7. Pierre Neuville $1,203,293 $1,203,293
5. Ofer Zvi Stern $1,911,423 $1,011,317
6. Thomas Cannuli $1,426,283 $785,996
8. Federico Butteroni $1,097,056 $571,566
9. Patrick Chan $1,001,020 $545,614
Totals $24,806,976 $14,153,427

While Pierre Neuville finished in seventh place, he ended up in fifth place based on his after-tax income. Unlike all of the other winners, Mr. Neuville gets to keep all of his winnings. It’s always nice when your after-tax income equals your before-tax income.

Last year, the IRS didn’t finish in first place. This year, the IRS was back in its normal spot: first place. The $8,467,091 it will receive exceeds the first place prize of $7,683,346 by 10%. As I noted before, it’s just less than double the after-tax winnings of the actual winner. That’s because we all know that the house (the IRS) always wins.

10 Responses to “The Real Winners of the World Series of Poker (2015 Edition)”

  1. johnqpublic says:

    I don’t understand the advantage of an American poker player living in the UK. Yes, a British born person does not pay taxes to the UK on a gambling win. But an American living in the UK still has to pay taxes to the US.
    The US is the only country in the world (other than supposedly Eritrea) that taxes its residents when they live overseas.

    Am I not correct? An American living in the UK pays taxes on gambling wins, whether the win happens in the UK or Nevada.

    • Russ says:

      There are a few other countries that tax on their worldwide income. One of the Scandinavian countries does (I can’t remember which), and I believe Israel also does. You are correct, though, that an American living in the United Kingdom owes tax on his gambling winnings–be those in Las Vegas or London.

  2. […] Fox, The Real Winners of the World Series of Poker (2015 Edition). Hint: the winner’s first initial is […]

  3. […] we are journalists and not brilliant with numbers, we were relieved to find the website taxabletalk.com, which does these tax calculations for us, saving us the […]

  4. […] The 2015 WSOP Main Event is now complete, with Joe McKeehen having cruised his way to the title, as well as collecting $7.6 million out of the tournament’s $24.8 million final table prize pool. Nevertheless, it was the Internal Revenue Service (IRS) who emerged the real winners, taking away a massive 34% of the final table fund, equal to around $8.4 million, according to taxabletalk.com. […]

  5. […] le rappelle Fox sur son blog, l’an dernier la plupart des finalistes s’étaient installés à Londres, afin […]

  6. […] While $7,683,346 is obviously a huge payday, McKeehen will not be holding onto all his winnings as the Internal Revenue Service (IRS) will also get its hands on at least $3,073,240 of that amount. The taxes McKeehen will have to pay include self-employment tax, federal income tax, state income tax, as well as local township Earned Income Tax. All told, he will keep just 56% of his winner’s fee, or $3,385,952, according to taxabletalk.com. […]

  7. […] is tradition Russ Fox of the Taxable Talk blog has parsed out just exactly what each member of the November Nine will clear after taxes and the numbers are […]

  8. Eric says:

    Question:

    Joe McKeehen also won the bracelet that is suppose to be valued at more than $500,000. Will Joe have to pay taxes on this item too – perhaps as income?

    • Russ says:

      It’s income. Separately from the cash prize the Rio (Caesars) should issue Joe McKeehen a Form 1099-MISC for the value of the bracelet. Given the purported value of the bracelet it’s almost a certainty that Mr. McKeehen will have to have the bracelet appraised (for insurance; large value jewelry items must be appraised). That appraisal value can be used for both tax and insurance purposes.

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