Just a quick note: when in doubt, always seek legal advise from a lawyer in your country or jurisdiction and know that online gambling laws are constantly changing and it is up to the person to know and understand the law.
Online casinos represent an excellent way for players around the world to have a relaxing and fun time at a casino while they play from the safety of their homes and even make some money in the process.
Many players, especially from the US, argue against the question if they should report any winnings to the IRS or not. The reality is that many online casinos are not licensed to operate under the United States Jurisdiction, excep, for example, Casinos that are licensed under New Jersey, Nevada, Pennsylvania or Indiana Laws. So, the question is still on: should you report the winning from an online casino to the IRS?
Any income from gambling whether generated online or not is taxable!
At the moment of this review, and according to the US laws, any income from gambling, independently if the casino is online or not, is taxable. When we refer to “winnings” we include all kinds of gambling and wagering like sports (basketball, football, soccer, horse racing and others), card games (poker, blackjack) or even slot games; this also include lottery, bingo and game shows.
Additionally any material prize that you receive from a casino as part of a bonus, VIP program, tournament or gift is also taxed, based on their fair market value. So for example say you won a car from an online casino, that is considered a capital gain and thus taxable. The good news about this is that you can deduct some of your losses (not your net losses) so you should keep track of all gambling-related documents that the online casino might provide you like receipts, tickets, payment slips or any other information that can be considered important when you decide to declare your taxes.
Outside the United States in places like Canada, The United Kingdom, Australia and New Zealand the regulations for online casinos related to taxes are different, for example: in the case of the UK the laws state that the government taxes the gross profit of the casino operators rather than the players winnings. On the other hand players from Canada can play lottery, live casino, poker and online casino games without paying any taxes unless they are professional players; the same goes from Australia and New Zealand as players residing in those countries can play tax free.
How much can you win without paying taxes?
If you are a beginner at gambling or you simply don’t know how much you can win without paying taxes, then you should be interested to know that there are some thresholds related to gambling taxes. Even though you should declare taxes no matter how much you win, there are some thresholds that can alter the way you report your winnings. Below is a list with an example of these thresholds:
- Prize money equals $600 or 300x Wager: if you get this from any source you must declare taxes from this winning.
- Prize money equals $1,200 or more: you must declare if you get that amount from Bingo and Slot games only.
- Prize money equals $1,500 or more: you must declare if you get that amount from Keno games only.
- Prize money equals $5,000 or more: you must declare if you get that amount from Poker games and tournaments only..
Once you get a prize you will receive your winnings minus the 25% tax (on the case that the casino. Players that gamble (specially inside the US) should be aware that not all casinos withhold taxes on a certain number of games regardless of the winnings obtained, those games include: Blackjack, craps and roulette.
Now that we have discussed how much you need to win (minimum) in order to declare your taxes, let us talk about what would happen if you decided to not report any of your gambling winnings as you might think that not reporting any winnings below the $600 are considered a “safe spot” as, without the proper documentation, it will be impossible for the IRS to track all undeclared winnings that are under that specific amount.
In some cases declaring your taxes can be beneficial for you, as depending on the total amount won and lost, you could get a “tax break” from reporting all your gamling-related income; however this would also mean that you would have to keep every possible document that indicates the exact amounts that you have wagered and the exact amounts that you have lost on any casino (individually) that you want to declare in your taxes.
Even if you manage to play at a casino that is not under the US jurisdiction but accepts US players, you will still need to declare your taxes regardless of where you get the income from (you could get the money overseas and still be required to declare).
Also, even though in some places inside the US online galbing is considered “illegal” you must still report any winning that proceeds from online gambling as the US taxes legal and illegal income as absurd as it sounds. A great example that is always referred to on the internet is the insolit story of Al Capone, the mob boss that went to jail for tax evasion and nor for the other numerous crimes that he committed.
Regarding declaring your taxes or not, here are some recommendations about it:
- You should declare your taxes even if the IRS has no way of tracking your winnings: this is to prevent a bad situation as you could not get audited for some reason and you could be clear your whole life; but, on the case that you did get audited and the IRS determines that you willfully tried to evade your taxes you could get punished with a penalty fee or with imprisonment depending on the case.
- Casinos that don’t provide a W-2G form: this form should be filled or delivered by the casinos th the players in order to declare their taxes that come from any winnings inside the casino, but even if you don’t receive this from you should still declare your winnings in your taxes, please remember that all gamlbing income is considered taxable.
- Nobody can force you to declare your taxes: even though we recommend that you inform yourself on how a Casino manages the “declaration of taxes” issue and we also recommend that you declare all of your winnings that are gambling-related (and not gambling-related to) at the end of the day it’s your responsibility and your decision to declare or not your taxes
