Are Online Casino Winnings Taxed?
This is a subject that is considered to be very “touchy” among online casino players worldwide. The short answer to this question is “yes”, but it is the “why, how, and when” that can make all the difference when considering if you would like to play in an online casino. In this article, we will explain a few things about online gambling and the tax procedures that encompass them. Granted, some of the principles here are taken from the USA’s tax laws, but those very same laws exist in almost every country in the world – they are just worded differently.
How Are Winnings Classified from a Tax Perspective?
While the specific definition can vary depending on a country’s tax laws, any winnings sustained from real money wagers, are generally considered to be “income tax”. One of the fascinating things is that you don’t even need to have the money or possess them in any personal bank account! The moment an online casino player makes a bet and wins, that sum of money is automatically considered to be taxable. And here is the kicker – if you decide to wager that same won amount and lose it, you will still owe tax on the money you won in the first place! However, if you do report your winnings and losses, the particular government might grant you some form of tax deduction.
Taxing in Countries Where Online Gambling Is Prohibited
It doesn’t matter if you’re gambling online in a casino situated in another country, and the jurisdiction you reside in prohibits all forms of gambling. Ironically, absolutely all income, including “illegal income” is fully taxable. The only difference between the two is that the latter may result in prison time.
Winnings from All Forms of Gambling Are Taxed
Whether you won from a slot machine, a hand of blackjack or poker, or participated in absolutely any gambling activity that has produced a “win”, it will be taxable. Granted, different governments are unable to thoroughly check every online casino player, which makes it very hard for taxing institutions to track those of them who’ve won – which is another reason why a good portion of those players doesn’t pay taxes on their winnings.
The Player and the Operator Owe Taxes on Bonuses!
You’ve just received a “no deposit” bonus? You owe taxes. The online casino has given you a deposit match bonus. They will have to pay tax on that, and you will have to pay tax based on your deposit amount! A variety of bonus offers that can be classified as “income”, are fully taxable by the government; however, there are a few exceptions. If the casino bonus in question is not withdrawable, has wagering requirements, or is required by the casino rules to be wagered on another game, it won’t be taxed.
The Law Always Has the Final Word
Whether you’ve decided to become a professional gambler or you just want to spend $10 just for fun, you are obliged by law, to claim every single win, and pay the necessary “income tax” to the appropriate tax collection administration of your country. It’s a “public secret” that a lot of online players don’t pay any tax on their winnings. This doesn’t stem from the fact that people willfully want to commit fraud, but rather that nobody wants to spend a good amount of time, in order to fully document their play sessions, wins, losses, and other required details, just so they can pay a tax fee of few cents on a win of measly $5.
Although this infraction can be considered “harmless”, to some extent, it is still defined to be against the law. If the tax revenue administration of a country performs an audit of an online casino player and they can’t prove that they have paid their taxes, they will be fined. If the severity of the “crime” is much more significant, the gambler can face prison time. The best way to avoid any of this is just to pay your taxes!