Ask the Slot Expert: Playing max coin on a slot machine

[Referring to last week's column about having to itemize deductions to deduct gambling losses:]

Presumably the standard deduction was at some time determined to be a best guess at what a typical person/family would be allowed to deduct from their gross income if they itemized. (How this determination was made and how it is updated is debatable of course, but it is what it is.) Hence the standard includes gambling losses; making an exception for them would open a Pandora's Box of other desired exceptions, which in turn could lead to the elimination of the standard altogether.

My main gripe with the tax treatment of gambling losses is that losses cannot be carried forward. A player who has lost $5K a year for the last 20 years, then hits a $10K jackpot can offset that win only with losses incurred during the tax year in which it was won. I grant that unlimited carrying forward may not be feasible, but businesses are allowed to carry losses forward for three years, I believe, so why not players for that long?

I have losses from stock and option trading from years ago that I think I can carry forward until they're used up. [Aside: The track record for the service I used is very good, but I didn't have the funds to buy every recommendation. So I had to pick which recommendations I traded. I picked many losers and a few hits and missed out on the home runs.] There's much more paperwork in filing trading losses and I suppose something similar would be required to carry forward gambling losses.

There's another comparison with business income reporting that illustrates an even more unfair aspect to reporting gambling winnings. When I report my income from columns and seminars, etc., I use Schedule C to find my net income and report that number on Form 1040. I don't have to report all my Schedule C income on one line and all my expenses on another. Yet I have to report all my winning gambling sessions on one line, and that number goes into my Adjusted Gross Income. My losing sessions are reported on another line farther down. As I said last week, gamblers could lose out on some deductions or credits even though they lost money overall gambling.

I know that on single-line, 3-reel straight multiplier machines (i.e., a one-credit jackpot wins 500 credits, a two-credit jackpot wins 1,000, a three-credit jackpot wins 1,500 credits) whenever you bet max credits you are simply exposing more of your bankroll to the house edge.

What I would like to know is: At what point, if there is one, does it make financial sense to play max credits? Or, does ANY max coin bonus make it worth it?

I try to stick with two-credit max machines with jackpot payouts along the lines of 1 = 2,000 and 2 = 5,000 so that, if I'm lucky enough to hit it, I'll be getting 2.5 instead of 2 times for the top prize. If I'm going to play a three-credit machine, I look for a larger spread (like 1 = 5,000, 2 = 10,000 and 3 = 20,000 or 25,000) because that bigger bonus for max credits is built into the long-term payback percentage — i.e., a three-credit 96 percent machine might only pay, say, 90 percent for one- or two-credit bets.

As you said, it does not make financial sense to bet more than one coin on a straight multiplier. In addition to the reel-spinning machine you described, there are many video slots that act like straight multipliers, with the payouts for additional coins bet on a payline just a multiple of the number of coins played on the line. Additional coins don't get you a bonus on a payout and don't activate additional winning combinations or bonus features, so there is no increase in long-term payback. Double or triple your bet and you double or triple your expected loss.

Now, what happens when you do get something for increasing your bet, like a bonus on the jackpot payout. The sad truth is that even large bonuses on the jackpot usually yield very small increases in long-term paybacks because the jackpot hits so infrequently. In your example, that 90 percent payback machine at one or two credits may pay back as little as 91 percent (or less) with max coin play. Of course, we'd have to see the PAR sheet to know exactly how much the long-term payback increases with max coin play.

If we double our bet, we have to cut the house edge in half just to stay even with the expected loss when playing one coin. If we can cut the house edge to less than one half, then it makes financial sense to bet two coins. Tripling our bet only makes financial sense when we can cut the house edge to less than one-third that of one-coin play. I've seen some two-coin machines on which it makes sense to play two coins, but I don't think I've seen a three-coin machine on which it's better to play three coins than one. It rarely makes financial sense to bet more than one coin — with one big exception.

It sometimes makes sense to play max coin on high-paying (99 percent or above) video poker. When you add in slot club benefits, your total picture is sometimes above 100 percent. I fear, though, that such generous slot clubs don't exist anymore.

Even though it rarely makes financial sense to play max coins, many times it makes emotional sense. You might play max coin to avoid disappointment. Would you ever stop beating yourself up if you landed the Megabucks symbols on the payline and didn't play enough coins to qualify for the multi-million dollar progressive?

Another reason you might increase your bet is for excitement. In addition to having a chance at winning some money, we play slots for entertainment. Like a good story or movie, we need highs and lows to make the experience interesting. The bankroll swings and the amount you can win on lower bets may not be enough to get your blood pumping. Just make sure your bankroll can afford the higher bet.