Online Gambling and Paying Tax

Understanding the relationship between paying tax and online gambling can be tricky, as it varies not only from country to country, but individual states, too. Here, we’ve broken down the key facts to help you better understand paying tax on your gambling wins.

Tax Basics

Tax rules concerning gambling vary a lot from nation to nation.

If you live in the US and profit from gambling, there’s usually a 24% tax.

If you are in the UK and win money when gaming, you pay no tax.

If you live in Canada and win money when gaming, you pay no tax providing you are not a professional gambler.

If you live in Australia or New Zealand and win money when gaming, you pay no tax.

In Germany, which instituted a gambling tax in 2012, you're taxed 5% on any profit.



Most gambling rules levy taxes not on winnings, but on profits.

It’s important to understand the tax rules of the country you’re gambling in. If you’re required to pay tax, then your next step would be to keep accurate records.

With the idea of protecting yourself and paying as little tax as possible, it’s important that you keep a record of all bets, losses, and winnings.

Being able to deduct any cash lost in betting will greatly lower your tax burden. The bottom line is to keep accurate records of your gambling activity.

Claiming Casino Wins On Your Taxes

All online gambling winnings within the USA are taxable, and you’re legally responsible to declare your winnings and losses to the Internal Revenue Service (IRS).

If you’re a professional gambler (a ‘full time’ gambler in the eyes of the IRS), and reside in the US, then you will be taxed at the normal income rate. Gambling wins are usually declared as ‘other income’ on tax forms (again, this can vary from country to country).


Declaring Losses

As you would declare any gambling winnings, it’s important you also declare any losses, too.

This can actually work to your advantage, as the tax you owe is a percentage of your winnings after all other gambling losses have been deducted from those winnings. To clarify, if you win $5,000 on a slot machine, but have gambling losses totally $4,000, you would not owe tax on $5,000, but, rather, on your $1,000 profit.

Even though online casino players are supposed to pay taxes on winnings, it’s rare that they ever do, as it’s tricky to track a specific player’s success.

It’s estimated that each year that hundreds of millions of dollars go unpaid on online winnings.

Online Gambling and Paying Tax

If you’re an online player and you win cash, do you have to pay taxes on it?

As most tax collectors would say, “the law is the law,” which means, “yes,” you do owe taxes. But it is rare that anyone pays them when playing online.

In a country like the US, you will still be expected to declare any online gambling wins/losses to the IRS. However, due to the nature of the Internet and the manner in which many nations view online gambling, enforcement of tax regulations on individuals is rare, while the providers of services do have to pay the taxman on a regular basis.


What about land-based casinos?

If you’ve been to Vegas and experienced a big win, you know the feeling that soon follows where your money is held, and tax deducted.

Those who wager and win at land-based establishments are tracked much more closely, especially when they win a large amount of money.

About four years ago it was estimated that Greece could pay off its escalating deficit in total if it could collect taxes owed on online gambling winnings. It tried and failed to get even a small percentage of the cash owed.

Casino License and Taxes

Casino, Sportsbook and Poker Room operators pay online gambling taxes, and are required to do so by the countries they operate in.

As a gambler, it’s important that you know and understand your country’s tax code. Ignorance of the law is no excuse if you’re accused of tax evasion or fraud.

Licensing

A gaming license is required for any casino that wishes to operate legally.

Most commonly it is the online casino owners who pay taxes on their profits, as well as having to cough-up a lot of cash for their license.

The other way in which governments collect taxes from online gambling sites is by granting licenses to such providers.

Countries that provide online gaming sites with licenses collect large fees for doing so and demand that those businesses meet certain regulations and follow specified rules.

The online gambling sites are physically located in the country that has granted them their license, and they are sanctioned by that government.

The countries or entities with the strictest licensing requirements and highest fees are Malta Gaming Authority, the Kahnawake Mohawk Territory of Canada, Gibraltar, and Alderney. It’s been noted by many that most of the casinos, sportsbooks, and poker rooms that are licensed by these governments are noted for their fairness and reliability.