When it comes to gambling online there is a common question that emerges amongst players and especially those who win…”Do I have to pay tax on my winnings?”
This is quite a difficult question to answer as tax laws differ from one country to another and whether or not you’ll pay tax on your winnings and the percentage applicable will really depend on where you reside.
In general online casinos do not reveal information on wins and losses to government authorities unless they are required by law to do so. This means that online casino winners are not automatically taxed, but it is your responsibility to understand and comply with the tax laws of your country. Some countries have a threshold where you are only required to declare winnings over a certain amount, so it is important to find out what that amount is in yours.
Even if you play at an online casino that is operated offshore it is advisable to declare your winnings. While small winnings will probably not be picked up by tax authorities, large ones probably will be and if you are audited for any reason, you will have to explain where the money came from.
If you do declare your winnings, don’t worry about “gambling” being reflected on your tax return, these will generally be listed as “other income” and you are only required to report on the net gain of your bet, so if you win $5,000 and bet $250 you will have to declare $4,750. You are unfortunately not allowed to offset your total gambling losses against that win though.
You are however able to list losses on your return as “other/miscellaneous deductions” and while these are not offset against wins, they should be kept track of because they are fully deductible up to your declared total of winnings.
Obviously you are required to prove all of your wins and losses and as such it is important to keep good records of your player and bank statements as proof of transactions with online casinos. By doing this and knowing what your country’s tax laws are regarding gambling wins and losses you will always be ensured peace of mind when dealing with the revenue service in your place of residence.
