Every country has its own specific laws about your tax obligations on gambling income but the responsibility for following those laws is that of the bettor. If you’ve won playing online slots for real money at any of the other casino games you need to declare those winnings and pay the appropriate taxes when you file your yearly tax return.
What you Need to Know
In all countries, tax laws on casino payouts are identical for winnings on both online and land-based gambling income. The main difference is that, in some jurisdictions, taxes on land-based casino disbursements are reported and deducted by the casino when you collect your winnings while the duty to report and pay taxes on online payouts is on you.
Some basic facts about taxes on casino income:
- In some jurisdictions, payouts on wins are tax-free. In other countries, gambling income is considered to be taxable. The type of gambling may also impact on wither or not you need to pay taxes on wins – lottery wins are not taxable in some countries even though those countries collect taxes on casino payouts, sports betting winnings may be exempt from taxes in some countries, etc.
- When it comes time to calculate taxable income, in some jurisdictions you can deduct gambling losses from your taxable income. Policies vary depending on the country and the amount of income that you want to deduct.
- In some countries, charitable or social gambling income is exempt from taxation.
- The amount of taxes that you pay and the procedures for reporting may differ if you’re a professional gambler vs. whether you’re an amateur. As a professional gambler, you may be able to claim taxation under a different category of income, deduct expenses, etc.
Gambling Online
If you win money through online play, the laws may be different. Online casino platforms are often hosted in countries different from those where the gamers play so, while some jurisdictions choose to ignore online wins, others calculate that income based on the player’s country of residence and the location of the gambling operator.
Currently, no countries require online operators to withhold taxes on their customer’s winnings or even to report those wins but that doesn’t mean that the player doesn’t have the responsibility to report those payouts as taxable income (where required). Don’t forget, payments are made by way of online banks so if your country taxes gambling income, authorities can trace payments and then determine whether or not you’ve reported it. If you are playing at an online casino, you should check with a tax lawyer or an accountant to find out what your obligations are to your jurisdiction’s tax agency.
Rates
Countries like Germany, Australia, Macau, Poland, Kenya, Denmark and France are known for their high tax rates on gambling income. Portugal, Italy, Belgium, Finland, Singapore and Russia tax gambling income but the rate is relatively low.
Tax Laws
What are the tax laws in some of the biggest gambling jurisdictions?
United States
In the United States, the Internal Revenue Service (IRS) considers all gambling payouts as taxable income. In addition, if you win big ticket items (trips, cars, etc), the value of those gifts is calculated together with your wins, based on the item’s fair market value.
The IRS includes income from online casino games, land-based casino wins, card room games, lottery payouts, racetrack wins, bingo games and game show prizes as taxable income. You will be asked to itemize your gambling income on your yearly tax return (Form 5754 or W-2G) where you can also deduct gambling losses. Gambling income in the US is taxed at 24%, regardless of the amount won. If you’re playing at a Vegas casino, if you win more than $600, you’ll receive the W-2G form from the casino. If your win exceeds $5000 and the payout is 300x or more of your wager, the casino will withhold 24% for tax purposes.
Most US states also tax gambling wins but not all. Florida, South Dakota, Nevada, New Hampshire, Tennessee, Delaware, Alaska and California do not tax gambling income. Regardless of where you won, you must file a W-2G form on your federal tax return and then follow the law in the state where you live regarding your obligation to pay state taxes.
For wins that you achieve through online gambling, you must report that income on line 21 of Form 1040 on your yearly IRS return. You can itemize deductions on line 27 of Form 1040, Schedule A.
UK, Canada, New Zealand and Australia
The UK, Canada, New Zealand and Australia do not tax gambling income. However, if you receive your payout in one of those countries, yet live in a country where gambling income is taxed, you are required to report that income in your country of residence.
Casino enthusiasts may try to hide their gambling income or they may simply forget to declare it but in the end, following the laws of the country in which you live will make it easier for you to keep playing in an environment of fun, excitement and real money wins.
(Please note that the above is for informational purposes only and in no way should be interpreted as legal advice.)
