Casino Comps Are Rebates

Dear Frank:

Regarding comped and discounted rooms and income taxes:

When a casino gives you a free room, or a discounted room, or even free meals and show tickets -- this is not considered to be taxable income. Rather, these should be considered rebates. Rebates are not taxable.

Think of these freebies or comps as free airline tickets in exchange for frequent flyer miles. There was an effort to tax these free airline tickets, but Congress abandoned the effort. One reason why Congress did not pursue taxing airline miles and free tickets is that they constituted rebates.

If you buy a car and get $2,000 back (rebate) that is also not taxed.

If Congress or the IRS wanted to tax casino comps, special rules would have to be issued. So far, they have not been.

Best,
Alan

Dear Alan:

Thanks for your letter. I guess since we are taxed on just about everything and the tax code is taller than I am, some casino players feel that their comps are not actually free (or rebates, as you say) but will ultimately cost them. They actually do cost most players since their play is calculated to lose a certain amount and they are actually being rebated on that theoretical loss. If the government then steps in and also wants a cut of the cut that leaves the player losing even more.

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All the best in and out of the casinos!

Frank Scoblete

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