The same goes for lottery and horse racing wins above $1200. Yet when playing online, paying taxes isn’t always so black and white. Americans who play at US-based online casinos will usually have to deal. 17 hours ago Every online casino wants to get as many gamblers as it can be only possible. Thus, it attracts to the site new players using various bonuses. As practice shows, bonuses is the best way to make people come to a casino, stay there and play. More than 80% of players started their gambling. Casino.com is a trusted online casino with the best games: slots, roulette, blackjack and more. Join now for your 100% bonus up to $400 + 200 free spins.
Gambling In America
If you've ever won a jackpot in Las Vegas, you probably know that your excitement diminishes at least a little when the casino throws a W-2G tax form in your face. In fact, if you don’t provide your social security number, the casino will automatically withhold up to 30% of your winnings. The same goes for lottery and horse racing wins above $1200. Yet when playing online, paying taxes isn’t always so black and white.
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- Record-Keeping for Gambling Activities. The IRS expects professional gamblers to keep records of their bets and winnings. This can be a simple diary of your losses and winnings, but it should include the date, the type of gaming activity you engaged in, the name and location of the gaming establishment or whether you engaged online.
Americans who play at US-based online casinos will usually have to deal with withholding taxes just like in Las Vegas. Yet that only represents a small fraction of your entertainment options. When playing at licensed offshore online casinos or poker rooms, American players usually won’t hear the words taxes mentioned at all.
Sadly, it is never safe to assume that your winnings are ultimately tax-free. It is true that Americans who play at internet gambling sites outside of the USA won’t be subject to withholding taxes when withdrawing their winnings. Yet you may be required to report these gains when you file your taxes in April. The greatest determinant is the number, size, and frequency of your wins. The actual threshold varies from state to state and whether or not you are an amateur or professional. For more information on reportable gambling winnings visit the IRS guide: https://www.irs.gov/instructions/iw2g/ar02.html
Whether or not you qualify as a professional gambler doesn’t solely depend on your performance at the tables. The main litmus test is the expectation and probability of profit in the eyes of the Internal Revenue Service. Your success and whether or not you have a regular job on top of gambling may also be factors.
With even amateur gamblers having to deal with taxes, professional gambling does have benefits. You can actually deduct your wins from your losses when your treat your gameplay as a business. No matter what your current status is and how often you play, it's best to keep tabs on your performance to develop strategies, stick to a budget, and simply know where you stand. You can find this tip sheet courtesy of the IRS: https://www.irs.gov/taxtopics/tc419.html
Whether or not the IRS can actually track your winnings is another matter entirely. Yet you should be aware of your obligations. With a huge budget deficit and ballooning debt, the federal government is looking to fill their financial holes any way they can. Between the NSA and modern forensic accounting practices, covering your digital tracks is more difficult than it used to be.
Tax Obligations Outside Of The USA
The United States is a bit of an outlier when it comes to taxing gambling winnings. In the United Kingdom, the government taxes the gross profits of casino operators rather than players. Canadians can play the lottery, live casinos, poker and online games without paying taxes unless they are a professional. Likewise, Australians and New Zealanders can also gamble tax-free. To put things in perspective, Americans do pay some of the lowest personal income taxes in the first world. Things tend to even out in the end.
Like anything else, interpreting the rules is always a matter of debate. Here's an interesting tax perspective for Canadians: http://business.financialpost.com/personal-finance/tax-expert-a-gamble-over-poker-winnings
Things To Consider
Keep in mind that Americans have to deal with both Federal and State taxes on most forms of income. Always keep basic records no matter how often you play or win. This will make things easier during tax season.
Accountants Have The Answers
No matter where you live, it's always best to discuss your personal situation with a licensed tax professional in your area. You can usually get a short consultation for free with complete confidentiality. It's the best way to play by the rules while minimizing your tax burden.
Editor’s note: The following is not to be construed as tax advice. Always consult a tax professional before filing.
Gambling has begun to proliferate throughout the US. Sports betting in particular has taken off in multiple states. And with the expansion of gambling comes (hopefully) a flurry of wins for new and seasoned gamblers alike.
If you’re lucky enough to win any amount of money gambling–whether it’s at a casino, a sportsbook, or elsewhere–it’s important to brush up on tax laws. Gambling winnings are taxable income, but they aren’t subject to the same tax rules as your normal income.
Though they can seem a bit daunting at first, taxes on gambling winnings are fairly easy to understand with a little help. Here’s a top-level guide that can help you get started.
All Gambling Winnings Are Taxable
Yes, all of them. Fantasy football winnings, slot machine jackpots, scratch-off tickets, poker tournament payouts…it’s all taxable.
Essentially, anything you win from a game of chance is subject to be taxed. One common misconception is that winnings are only taxable beyond a certain threshold. This is untrue. Instead, gambling institutions (casinos, race tracks, sportsbooks, etc.) have thresholds that determine when they issue you specific tax forms.
To put it simply, whether you win $100 or $10,000, you need to pay taxes on those winnings.
In most cases, federal taxes on gambling winnings are 24%. Penalties can apply if you pay late or don’t report the winnings, though, so be diligent about tracking and reporting your earnings.
Form WG-2 For Big Wins
If you hit a big win, most gambling establishments will automatically give you a W2-G tax form. The threshold for receiving a Form W2-G varies based on the type of gambling and the amount you won. Here are the thresholds:
- Sports betting and fantasy sports (DFS included): $600
- Bingo and slot machines: $1,200
- Keno: $1,500
- Poker tournaments: $5,000
Table games–blackjack, craps, sic bo, baccarat, etc.– are exempt from Form W2-G rules. You still need to report your winnings, but you won’t receive a special form.
Lottery is absent from this list because the tax codes surrounding Powerball or other big lotto prizes can get more complex. If you win big on a lottery game, it’s best to get in touch with an accountant or tax service to assist you.
Online Sports Betting Wins: Form 1099
For sports bettors, the IRS Form 1099 will be the most common tax form. When you win more than $600 on a sportsbook site such as DraftKings, FanDuel, or PointsBet, the operator is required to send you a Form 1099-MISC. If you cash out those winnings with PayPal, you’ll get a Form 1099-K instead. Either way, this form helps you easily include your winnings with your yearly tax return.
Once again, remember that you’re still obligated to report your winnings even if you don’t receive a form from the sportsbook where you won money. They are only required to send you the form if you win more than $600. Winnings below that are still taxable; you just need to report them on your own.
Keep Track Of Your Wins
If you win money gambling, it’s crucial to keep a record of your wins and relevant information to make filing your taxes easy. To get started, keep track of the following information for each win:
- Win amount
- Original bet
- Type of gambling (online sports betting, Daily Fantasy Sports, slots, etc)
- Where you won (if online, name of the service/betting platform)
- Witnesses to your win, if applicable
- Tax forms give to you by the gambling institution, if applicable
This will help you file your taxes without needing to backtrack and find this information when it comes time to submit your info to the IRS.
You Can Deduct Losses, But There’s A Catch
The flip side of gambling winnings is, of course, losses. If you lose money gambling, you can deduct those losses when you file your tax return. But there are a few stipulations:
- To claim gambling losses as a deduction, you must itemize your deductions.
- You can only claim losses up to the winnings you claimed.
That first point (itemizing your deductions) means you can’t claim the standard deduction when you file your taxes. In many cases, itemizing just to claim a few gambling losses will end up losing you money on your tax return. It’s only advised to take this route if you already itemize your deductions.
The second point brings up another important point. If you won a total of $3,000 but lost $6,000 gambling, you can only deduct up to $3,000.
In other words, you should carefully consider the value of deducting your gambling losses. It can be helpful if you lost a significant chunk of money, but in many cases, it isn’t worth your while. If you’re unsure about whether to deduct gambling losses, I recommend contacting a tax professional.
Different Rules For Professional Gamblers
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If you make your living gambling, most of the above rules don’t apply to you. When gambling is your full-time job, you can instead file as a self-employed person. You’re still subject to taxes on your winnings, but they are treated as normal income instead of gambling winnings.
Professional gamblers can also deduct certain costs as business expenses, lowering potential tax payments. This includes a percentage of your internet bill (if you gamble primarily online), travel expenses if you fly or drive to tournament locations, and other related costs.
Claiming Gambling Wins
Professional gambling makes the tax process look much different. If you fall into this category, finding a solid online tax platform or a tax advisor is a great course of action. These rules only apply to true full-time, professional gamblers. Otherwise, you could fall within the IRS rules for hobby losses, which can open you up to audit and increased taxes and penalties.
State Taxes Vary
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While I’ve covered federal taxes here, it’s also important to find your state’s laws with regard to gambling winnings and taxes. Check with your state’s tax organization to find out which taxes you’re subject to in your jurisdiction.