There are a lot of bloggers running around like chickens with their heads cut off (myself included), trying to come up with ways to make real money/gold playing Diablo 3 before the game is even released. Let's take a chill pill for a moment, slow things down, and think about the reality of this new game within a game.
To begin this new conversation, what about Taxes in Diablo? At the end of the year, I pay a massive amount of money to taxes for my earnings at The Traffic Blogger and especially Just My Two Copper. You can bet your house that the government will want a percentage of your Diablo 3 earnings. Even if you're making a grand over the course of the entire year, the government is going to want $300 out of those $1000 by the time all is said and done between government, state, etc. Is this fair? Should the government be able to tax this? Technically yes, but the discussion gets better with this next statement...
Should you be able to write off money you spend bettering your character or buying supplies for the purpose of earning real money on the Diablo 3 auction house; or perhaps exploiting it to your hearts content? I can guarantee you that it will be difficult to declare these and I foresee lawsuits springing up depending on how much money some people can make in the game. You may never reach high amounts, but I bet that people like this pro multiboxer could make insane amounts of money.
So should these players who make, dare I say, thousands of dollars a year playing Diablo 3 not be allowed to declare the expenses of their online businesses? Can't I declare all those bones I purchased for crafting purposes or all those weapons I bought to salvage as expenses?
I'll be tracking everything I spend on the Diablo 3 Real Money Auction House that relates to earning gold in the game. Better gear, weapons, supplies for artisans, leveling artisans, etc.
How about a percentage of your internet costs? Monitors? Computer repair? A new shiny mouse? Quite a bit could be written off for tax purposes. Even gas used to acquire these things could be written off. What about your purchase of the game?
It's a fun discussion, have at it and share you opinion. Right now all we have are questions and interesting analysis, but how is that any different from what everyone else is posting about?
If it's bought for the soul intention of using it for Diablo 3, I could see it being written off. But if you just got a new monitor for shits and giggles and then want to write it off after the fact, I don't think that would go down very well with uncle sam.
But that's just my two copper. (See what I did there? Hahaha.)
I'm in Canada and now that you bring this topic up, it saddens me to think that D3 earnings could possibly be taxed. It makes sense that it would, but imagining what one would write down on their tax forms, funny and yet sad. I suppose it would be some kind of "other" earnings, I'll have fun talking to my dad about this (he's a retired CA). lol
The IRS has the power to tax income from "any and all sources". Yes, technically you should report all income from sales on D3's AH. Does that mean everyone will? Of course not. Have you sold something on ebay and not reported it? Did the IRS call you about the 50 bucks you made on Ebay? Probably not because it's not worth it to them even if they received word from paypal (I believe paypal is required to report to the IRS how much they pay people from ebay and such after they receive 400 or 600 dollars.)
Most people would only be able to claim selling on Diablo 3 as a hobby which has it's own limits. http://www.irs.gov/newsroom/article/0,,id=169490,00.html You would file your earnings on the "other income line" http://taxes.about.com/od/income/qt/other_income.htm Any deductions would be filed on Schedule A Itemized deductions. Unless you pay on a house you more than likely do not itemize your deductions. Also, hobby deductions can only go up to the amount of income you received from your hobby. You cannot show a loss from a hobby. If you make 50 bucks selling on the AH, you could only claim up to 50 bucks in deductions for a hobby.
If you run it like a business and meet the requirements from here http://www.irs.gov/newsroom/article/0,,id=169490,00.html then you can file a schedule C and show a loss just like a business. How much will you pay in taxes? Depends. Schedule C requires you to pay both the personal and business side of social security and medicare taxes. You do get a little tax break though which is nice. Generally you have to pay 15.3% http://www.ssa.gov/oact/progdata/taxRates.html but there are some tax breaks right now and I believe you wouldn't pay this much. This also includes any personal income tax minus deductions you pay.
That's a quick rundown on some federal taxes for it that I could get while at work. Each state is separate so that depends on where you live with their income tax rules. Personally, most people will not report the income just like they don't with Ebay unless they plan to try to make a living off it. Or if you sell a really valuable item.
This only matters if you live in the U.S. A lot of european countries don't tax stuff like this because it will be classed as gambling. It's only the US who tax people on gambling winnings.
Meh, here in Hungary our great government even taxes gambling.
This only matters if you live in the U.S. A lot of european countries don't tax stuff like this because it will be classed as gambling. It's only the US who tax people on gambling winnings.
This only matters if you live in the U.S. A lot of european countries don't tax stuff like this because it will be classed as gambling. It's only the US who tax people on gambling winnings.
Now that you mention it, Canada doesn't tax winnings/gambling either. No taxes for "winnings from betting or gambling for simple recreation or enjoyment"
its not gambling. You're paying (or being paid) for an item (digital, IP, whatever), you're not paying for a chance at an item.
gambling would be if you put a bid in, didn't win the item, and lost the bid money. That's not what's happening. You keep your money until you get your item.
Alternatively, you don't get your money until someone else has your item.
- I just see loads of people from wow having this great plan to do this, as in wow sometimes you can resell an item for 1000x more gold. Well this wont work. If anything people will over inflate the price of their find, theres no way someone will post an item for a signifficantly lower price than average AH price.
The entire banking (and other financial) industries are BASICALLY based around this practice. Just because "there's no way someone will post an item for less" doesn't mean that it won't happen. Additionally, there is a natural fluctuation in any price and profit can be made by doing absolutely nothing but buying it at the nadir and selling it at the apex.
Thank you financial industry for contributing to society with your vast works of timing. (i swear i don't have a problem with brokers. really. i am 100% not lying.)
If Diablo 3 RMAH is calculated like Gambling yup Canada doesn't tax it. However the province of Quebec have tons of laws around Gambling (that's why that province is often not accepted in prizes and sweepstakes).
its not gambling. You're paying (or being paid) for an item (digital, IP, whatever), you're not paying for a chance at an item.
gambling would be if you put a bid in, didn't win the item, and lost the bid money. That's not what's happening. You keep your money until you get your item.
Alternatively, you don't get your money until someone else has your item.
You're gambling your time. You might play diablo 3 for weeks and get nothing worthwhile, because guess what, it's a very chance based game. Then you get something nice one day and sell it. You went for weeks without winning anything and then suddenly you get a big win. I've already spoken with UK IRS, they see this as gambling.
Are they going to consider for all the dozens or even hundreds of hours that you play any don't obtain anything worth selling on the RMAH? Imagine the expenses that would run up that would need to be deducted from taxes.
That really doesn't fit with the normal definition of gambling. Traditional gambling is waging money on some kind of outcome or game like blackjack. In D3 everything* that drops can be sold. There is no "gambling" of time. Yes most of the stuff that drops will be next to worthless but that doesn't change the fact you can sell everything that drops on the AH OR sell it for gold and then sell the gold for $. This would probably not fall under gambling terms.
To begin this new conversation, what about Taxes in Diablo? At the end of the year, I pay a massive amount of money to taxes for my earnings at The Traffic Blogger and especially Just My Two Copper. You can bet your house that the government will want a percentage of your Diablo 3 earnings. Even if you're making a grand over the course of the entire year, the government is going to want $300 out of those $1000 by the time all is said and done between government, state, etc. Is this fair? Should the government be able to tax this? Technically yes, but the discussion gets better with this next statement...
Should you be able to write off money you spend bettering your character or buying supplies for the purpose of earning real money on the Diablo 3 auction house; or perhaps exploiting it to your hearts content? I can guarantee you that it will be difficult to declare these and I foresee lawsuits springing up depending on how much money some people can make in the game. You may never reach high amounts, but I bet that people like this pro multiboxer could make insane amounts of money.
So should these players who make, dare I say, thousands of dollars a year playing Diablo 3 not be allowed to declare the expenses of their online businesses? Can't I declare all those bones I purchased for crafting purposes or all those weapons I bought to salvage as expenses?
I'll be tracking everything I spend on the Diablo 3 Real Money Auction House that relates to earning gold in the game. Better gear, weapons, supplies for artisans, leveling artisans, etc.
How about a percentage of your internet costs? Monitors? Computer repair? A new shiny mouse? Quite a bit could be written off for tax purposes. Even gas used to acquire these things could be written off. What about your purchase of the game?
It's a fun discussion, have at it and share you opinion. Right now all we have are questions and interesting analysis, but how is that any different from what everyone else is posting about?
But that's just my two copper.
(See what I did there? Hahaha.)
I'm in Canada and now that you bring this topic up, it saddens me to think that D3 earnings could possibly be taxed. It makes sense that it would, but imagining what one would write down on their tax forms, funny and yet sad. I suppose it would be some kind of "other" earnings, I'll have fun talking to my dad about this (he's a retired CA). lol
Most people would only be able to claim selling on Diablo 3 as a hobby which has it's own limits. http://www.irs.gov/newsroom/article/0,,id=169490,00.html You would file your earnings on the "other income line" http://taxes.about.com/od/income/qt/other_income.htm Any deductions would be filed on Schedule A Itemized deductions. Unless you pay on a house you more than likely do not itemize your deductions. Also, hobby deductions can only go up to the amount of income you received from your hobby. You cannot show a loss from a hobby. If you make 50 bucks selling on the AH, you could only claim up to 50 bucks in deductions for a hobby.
If you run it like a business and meet the requirements from here http://www.irs.gov/newsroom/article/0,,id=169490,00.html then you can file a schedule C and show a loss just like a business. How much will you pay in taxes? Depends. Schedule C requires you to pay both the personal and business side of social security and medicare taxes. You do get a little tax break though which is nice. Generally you have to pay 15.3% http://www.ssa.gov/oact/progdata/taxRates.html but there are some tax breaks right now and I believe you wouldn't pay this much. This also includes any personal income tax minus deductions you pay.
That's a quick rundown on some federal taxes for it that I could get while at work. Each state is separate so that depends on where you live with their income tax rules. Personally, most people will not report the income just like they don't with Ebay unless they plan to try to make a living off it. Or if you sell a really valuable item.
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Meh, here in Hungary our great government even taxes gambling.
My Retro Video Game Store
My Youtube Lets Play Channel
Now that you mention it, Canada doesn't tax winnings/gambling either. No taxes for "winnings from betting or gambling for simple recreation or enjoyment"
gambling would be if you put a bid in, didn't win the item, and lost the bid money. That's not what's happening. You keep your money until you get your item.
Alternatively, you don't get your money until someone else has your item.
Thank you financial industry for contributing to society with your vast works of timing. (i swear i don't have a problem with brokers. really. i am 100% not lying.)
You could call a start-up business that. "you might make a profit, you might not, THEREFORE ITS GAMBLING!@~~!@!@!!!!"
I'm pretty sure that a start up business isn't considered gambling for tax purposes.
So I wonder if we will get screwed up by that...
My Retro Video Game Store
My Youtube Lets Play Channel