I'll never have a legal residence in Ohio, or Connecticut, or Massachusetts because they are sports bettor hells (it seems there are at least two other states similar, but I can't find the info).
Why are they "sports bettor hells"?
Because their state taxes on your gambling income can be ten times (or more) higher than most other states. It has to do with the way the state income tax laws are written. In these states you are not allowed to deduct your gambling losses from your gambling winnings on your tax return (as opposed to most other states and even the IRS).
For example, if during the year 2005 your netted $15,000 in wins (subtracting your total losses from your total wins) and if you live in one of the handful of state tax hells, you will not have to pay state income tax on the $15,000, but instead you'll have to pay on your total yearly wins, not counting losses. That is, if you won $50,000 and lost $35,000 during 2005 you'll have to pay the state income tax rate on $50,000!
You will easily find you are paying more income tax money to your state than your federal taxes to the IRS.
In Ohio, for example, the state tax goes all the way up to over 7% of your AGI. Depending on your tax bracket (ohio's state taxes are graduated, or marginalized, similar to the federal income tax), you may end up paying, for example, 3.5% or 4% , or 5% on $50,000. For example, $50,000 times 5% is $2500.
If on the other hand you lived right across the border in Pennsylvania you'd only have to pay 3.07% (flat-rate) of $15,000, which is $461.
If you lived in Tennesse, you'd pay $0 on your gambling winnings in state income taxes because Tennesse has no state income tax (neither do Alaska, Florida, Texas, South Dakota, Washingtom, Nevada, and Wyoming -- the sportsbettor state "tax heavens").
Note: Tennesse (along with another state, maybe New Hampshire) only have state income tax on capital gains, or similar.
In addition, many cities will tax your gambling income (though, in most cases, at a much lower rate than state and federal income taxes). New York City taxes up to almost 6%, though I don't know if they allow you to deduct your losses or not.
According to this some of the most sportsbettor friendly cities to live in the US are: Seattle, Houston, Dallas, and Miami because they have neither state income taxes nor city taxes.
Clearly the state income tax laws were not written with the nature of sportsbetting in mind, but instead lottery winners or similar.
The situation gets worse the more money you bet for obvious reasons. Consider a bettor who bets $500 or $1000 per game ($750 average). If he bets multiple times (say 10 times) per week most weeks of the year (50 weeks a year), I think it's fair to say he will have a total of about $375,000 in action for the year. Even if he only hits 50% winners (thus causing him a net loss on the year, the state will only consider his wins of about $187,500 and he will have to pay whatever the tax rate is for that amount and his tax bracket. If it is 5% then he's paying over $9000.
Why are they "sports bettor hells"?
Because their state taxes on your gambling income can be ten times (or more) higher than most other states. It has to do with the way the state income tax laws are written. In these states you are not allowed to deduct your gambling losses from your gambling winnings on your tax return (as opposed to most other states and even the IRS).
For example, if during the year 2005 your netted $15,000 in wins (subtracting your total losses from your total wins) and if you live in one of the handful of state tax hells, you will not have to pay state income tax on the $15,000, but instead you'll have to pay on your total yearly wins, not counting losses. That is, if you won $50,000 and lost $35,000 during 2005 you'll have to pay the state income tax rate on $50,000!
You will easily find you are paying more income tax money to your state than your federal taxes to the IRS.
In Ohio, for example, the state tax goes all the way up to over 7% of your AGI. Depending on your tax bracket (ohio's state taxes are graduated, or marginalized, similar to the federal income tax), you may end up paying, for example, 3.5% or 4% , or 5% on $50,000. For example, $50,000 times 5% is $2500.
If on the other hand you lived right across the border in Pennsylvania you'd only have to pay 3.07% (flat-rate) of $15,000, which is $461.
If you lived in Tennesse, you'd pay $0 on your gambling winnings in state income taxes because Tennesse has no state income tax (neither do Alaska, Florida, Texas, South Dakota, Washingtom, Nevada, and Wyoming -- the sportsbettor state "tax heavens").
Note: Tennesse (along with another state, maybe New Hampshire) only have state income tax on capital gains, or similar.
In addition, many cities will tax your gambling income (though, in most cases, at a much lower rate than state and federal income taxes). New York City taxes up to almost 6%, though I don't know if they allow you to deduct your losses or not.
According to this some of the most sportsbettor friendly cities to live in the US are: Seattle, Houston, Dallas, and Miami because they have neither state income taxes nor city taxes.
Clearly the state income tax laws were not written with the nature of sportsbetting in mind, but instead lottery winners or similar.
The situation gets worse the more money you bet for obvious reasons. Consider a bettor who bets $500 or $1000 per game ($750 average). If he bets multiple times (say 10 times) per week most weeks of the year (50 weeks a year), I think it's fair to say he will have a total of about $375,000 in action for the year. Even if he only hits 50% winners (thus causing him a net loss on the year, the state will only consider his wins of about $187,500 and he will have to pay whatever the tax rate is for that amount and his tax bracket. If it is 5% then he's paying over $9000.
