Online Gambling Tax FAQ’s

10 April 2018 7 minutes to read
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Whether we hit a jackpot at an online casino or in a brick-and-mortar venue it sure is a nice feeling.

What usually happens next is that the dreaded tax fairy starts yakking on our shoulder about taxes and W2-G’s and what to tell our significant other, taxes can be confusing. In this article we’re going to shed some light on taxable casino winnings around the globe and how to go about it.

Benjamin Franklin said: “The only thing that we’re certain about in this world is death and taxes.” When it comes to the world of online gambling these words ring true. In the United States, for years taxables always focused on slots and keno, to stay underneath the radar slots paid a top jackpot of $1,199 while keno paid $1,500. Nobody cared about poker or table games until Caribbean Stud poker and regular poker tournaments came along which woke up the slumbering giant, Uncle Sam.

Online Casino Tax In The United States Of America

The United States tax code states that every single income derived by a U.S citizen is taxable, it doesn’t matter if it’s earned over the Internet or overseas. Section 61(a) defines gross income as “all income from whatever source derived,” including gambling, unless otherwise provided. McClanahan v. United States, 292 F.2d 630, 631-632 (5th Cir. 1961).

”The tax rules for online gambling are quite clear they’re the same as in the brick and mortar casinos”.

Not all bets qualify to be taxed and not all casino games are taxed the same. Luckily you won’t get whacked on regular wins at blackjack or Pai Gow, however, it’s a different story if you hit Five Aces or a 7-card Straight Flush, look out! Any win that’s more than $600 and 300 times your wager (or more) you can start filling out a W2-G tax form.

If you won a jackpot that’s more than $5,000 the casino automatically withholds 25% of your payout, unfortunately you don’t have a say in the matter. The good part is that you can always head on over to the Player’s Club desk and request an annual win-loss statement. If your other losses are greater than your jackpot win, you don’t have to pay a dime – assuming you can itemize your taxes.

Essentially it’s good to know what you’ll get taxed on. After getting your Social Security Number and checking your ID, poker rooms give you a 1099 form with your winnings. As for table games the rule for taxables is a 300 to 1 payoff and $600 or more. When you make a straight flush on Let it Ride and you get paid 200 to 1 on the regular bet, you won’t be taxed!

If you made a $25 bet and won $5,000 it’s all yours, the tax man isn’t told about your win. But, if you made a buck on the bonus bet and won $2,000, you’ll get taxed because it pays 2,000 to 1. Likewise, if you hit a Royal Flush at a World Poker Tour event with a $10 bet on the bonus, the $5,000 payoff at 500 to 1 is taxable.

When it comes to paying tax on your online casino winnings it all boils down to one thing, location. Players from Canada, Europe, Oceania and the UK are not liable to pay any tax on their casino, poker, bingo or lottery winnings. Countries like the United States compels its residents to declare the cash they’ve won from gambling in order to complete their tax payments. Gambling taxation differs from jurisdiction to jurisdiction.


It’s Not Necessary To Declare My Online Gambling Income Because I Did Not Receive A W-2G?

Even if you haven’t received a W-2G form all gambling income is taxable and must be declared.


Can I Net My Online Casino Wins And Losses?

If you are a professional gambler you can. Keep in mind that most gamblers put their gambling income on line 21 (other income) and take their losses up to the amount of their winnings, as an itemized deduction on Schedule A. It is not subjected to the 2% AGI limitation.


If I’m From Ireland Must I Pay Tax On Online Casino Winnings?

The same taxation rules that apply in the United Kingdom apply in Ireland. Winnings from gambling is neither seen as capital nor income but based solely on ‘luck’.


Do Canadians Pay Tax On Online Casino Wins?

The taxation laws in Canada differs to a degree because Canadian online casino winnings is not taxed, to date no legal framework exists that addresses this issue. Under the Income Tax Act some casino winnings are considered as ‘prizes’.


Do Residents From Australia and New Zealand Pay Tax On Their Online Casino Winnings?

The good news is that Australian online casino players and their Kiwi neighbours are not liable to pay tax on their gambling winnings. Reason being in both countries it’s seen as a hobby as opposed to a profession, many professional gamblers use it as a tax loophole.

When it comes to casino winnings there’s no hard and fast rule. While some European countries turn a blind eye to it others aren’t so lenient.

Countries Exempted From Online Gambling Tax

  • Austria
  • Belgium
  • Bulgaria
  • Canada
  • Denmark
  • Germany
  • Italy
  • Malta
  • Sweden

The above is a list of the countries where online casino winnings aren’t taxed. Countries like India on the other hand impose different taxation laws.


If I’m A Professional UK Gambler Must I Pay Tax On My Online Casino Wins?

Professional gamblers from the UK are not liable to pay tax since all gambling wins are exempted from taxation. If you’re self-assessed you can claim a tax refund on your losses.

Non-UK resident must pay tax on their gambling wins. Here’s an example, UK poker players who participate in tournaments in Las Vegas aren’t liable to pay taxes in their home country because it’s in the United States, 30% of their winnings are held, they’ll have to fill in a W2-G form.


Do Online Casinos Pay Tax?

Yes they do. The Point of Consumption Tax stipulates that each online casino in the UK licensed by the UKGC (United Kingdom Gambling Commission) must pay a Point of Consumption Tax (PoT) of 15%.


Must I declare The Cash I’ve Won Gambling Online?

The betting duty was scrapped in 2001 in the UK as such you don’t need to declare the cash you’ve won to HMRC (Her Majesty’s Revenue and Customs). If you’re from the U.S you must declare your winnings.


Can I Give or Gift My Online Casino Winnings?

Should you pass away within 7 years, gambling winnings are subject to inheritance tax of gifting. The maximum amount that can be freely gifted is £250.


UK Online Gambling Tax History

During the 2000s online casino and betting operators not licensed in the UK targeted British punters from offshore tax havens. Gordon Brown put a stop to this when he introduced the 15% Point of Consumption tax on their gross profits.

This Act is a change in the taxation law based on geography. Since 2014, the prior ‘point of purchase’ law was amended and replaced by that of the ‘point of consumption’, meaning that gambling providers outside of the UK are still subjected to the 15% tax levy on wagers placed by UK punters.


What Is The UK’s Gambling (Licensing and Advertising) Act?

According to the 2014 amendments operators who specifically target British punters must be licensed by the British Gambling Commission instead of being licensed in other jurisdictions.


What Are Betting Duties?

Based on the manner in which they conduct their business gambling operators must pay their betting duties in order to remain legally compliant. At this stage there are 3 types:

  • General Betting Duty (GBD)
  • Pool Betting Duty (PBD)
  • Remote Betting Duty (RBD)


Will Brexit Have A Negative Impact On Online Gambling Tax?

Regrettably it will but it won’t be hit as hard as some of the other sectors of the economy. Research points out that gambling is ‘recession-proof’ even if the economy is in a downward spiral.

After the Point of Consumption tax a lot of the UK’s most prominent betting and casino operators set up shop in offshore jurisdictions (Europe). Gibraltar’s position as a UK territory is uncertain, if it leaves the UK it will have a dire impact on employment since many operators are licensed here.


Now That Trump Is President Will It Have An Impact On The U.S Gambling Tax?

Trump said that he’s a fan of virtual gambling, it’s safe to say that during his tenure online gambling regulation has taken a step in the right direction. He’s also an astute businessman with a fleet of land casinos. Unfortunately regulation is not something that’s going to happen overnight despite gambling bills beings passed by various states.

This is what Trump said about online gambling regulation in the U.S: “It has to happen because many other countries are doing it and like usual the US is missing out.”


Why Are Online Casinos Licensed In Gibraltar?

Gibraltar has a favourable tax climate with a tax levy of 1% that’s capped at £425,000. The Point of Consumption tax rate leveled the playing field for British operators based in so-called tax havens. Gordon Brown changed the face of the UK’s gambling industry by scrapping tax on player winnings and relaxed advertising laws for the bigger operators.

What Does The Gambling Act of 2005 Say?

During the early 2000s internet gambling experienced a slew of technological innovations such as faster Internet that’s cheaper, improved laptops, PCs and smartphones that practically turned the industry on its head.

Thanks to the UKGC online casino operators were under the magnifying glass for the first time. To operate in the UK they had to apply for a license before they could advertise their products to the UK consumer. Their advertising campaigns must not be misleading, they must have legitimate software and responsible gaming protocols is a must.


Did The Point of Consumption Tax Have A Positive Effect On Online Casinos?

Yes it did because players were no longer required to pay tax on their winnings. Operators complained about it though, William Hill said that its profit dropped by £20 million in the first half of the year. Lots of mergers between operators occurred which bodes well for the industry in the long run. For instance Ladbrokes merged with Coral and Paddy Power with Betfair. Hopefully losses incurred by the Point of Consumption tax will be negated over the long run.


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