Understanding Winning and Losing in Gambling

0
132

It may seem that there is nothing special about winning and losing money at online casinos. Everything seems to be quite straightforward — you make either a winning or losing bet. However, have you thought about taxes or refunds that come on par with all your money-related manipulations at online casinos? The thing is that most forms of income are taxable, and interest rates are different in each country.

This review will focus on what casino winnings and losses are and what the tax on winnings in gambling is. Also, keep reading to know how to prove gambling losses in a $5 minimum deposit casino Australia and what types of taxes you will have to deal with.

How Is the Tax on Gambling Winnings Calculated?

The Internal Revenue Service (IRS) treats gambling wins as income and therefore requires people to pay tax on winnings. This allows gamblers to deduct their gambling losses if they list their deductions. The IRS also requires taxpayers to keep a report of winnings and losses to deduct losses. Winnings or losses can be generated from the following gambling activities: lotteries, sweepstakes, dog races, horse races, casino games, poker games, and sporting events. 

To get a detailed expenditure report, make sure to include the date and type of gambling, the name, and address of the gambling establishment, the people with whom the taxpayer gambled, and the amounts won and lost. The deducted gambling losses cannot exceed the winnings shown as income. So if a player has $3,000 marked as winnings but $7,000 is associated with losses, one can only deduct $3,000. The remaining $4,000 cannot be written off or carried forward. If a player has $3,000 in winnings and $1,000 in losses, one can list $3,000 as income and then claim $1,000 as an itemized deduction.

What Is the Income Tax on Gambling Winnings in Developed Countries?

There is no fixed percentage or amount. Everything depends on the country policy and related rules, for example:

  • In the USA — According to Investopedia, game winnings are taxed at 24%. However, the money received under specific conditions over $5,000 is subject to income tax. As a rule, these are prize money received in lotteries and bets, the proceeds of which exceeded the set amount by 300 times. Taxes are also payable upon receipt of a prize, such as a car or a travel package. In this case, the same income tax is withheld in the amount of 24% of the winnings;
  • In Australia — Winnings are not taxed in Australia whether you receive them from online casinos or land-based facilities. Casino operators are required to pay a license fee as well as gambling tax. These tax laws vary from state to state. Some of them take the turnover amount as the basis for gambling taxes. Others are the net profit or losses of the players;
  • In Canada — The people of Canada have been gambling since 1497. All forms of gambling were banned in 1892. Bingo and sweepstakes were legalized in 1900; horse racing are available since 1910, and gambling events at fairs and exhibitions went live only in 1925. By 1969, the law prohibiting gambling had been amended to legalize lotteries. Today, almost every province across Canada has a casino, and online gambling has become a legal pastime since the 2000s. If you win at an online or land-based casino in Canada, you will not be taxed by the authorities.

How Does Gambling Income Work?

Gambling income includes any money generated from gambling, whether it is casino winnings, lotteries, lotteries, horse/dog racing, bingo, keno, or betting pools. The fair market value of non-cash prizes is also classified as gambling income. In some cases, gambling establishments may be required to withhold 24 percent of their federal income tax profits by reporting this on a W-2G form, which is passed to the winner and sent to the IRS. If a lucky gambler does not receive a W-2G form from the payer, one must still report all gambling income to the IRS.

The full amount of gambling income minus the value of the bet must be included on your federal tax return. According to the IRS, taxpayers who are not professional gamblers must report all gambling income in an IRS standard document that individual taxpayers use to file their annual tax returns. Total gambling income, winnings split between two or more people, should also be reported to the IRS.

How to Prove Loss in Gambling?

Big gambling losses are stressful and can cause or worsen gambling addiction. Also, many gamblers do not want to admit loss and desperately continue to try to win back. For example, a person can win $10,000 at a casino but then lose $9,000 on the same gaming day. Despite the $1,000 remaining, this player is sent home with a $10,000 W-2 from Casino A and still has to pay taxes on that income.

Therefore, often losing from gambling can have not only psychological and financial consequences but can lead to other destructive forms of behavior. Gambling losses or debts can lead to theft, bad checks, and other crimes to cover player losses. Gambling can be highly addictive and negatively affect a person’s family life and career.

Conclusion

There is a different attitude towards professional players who play on a regular basis. All of their earnings are generally considered regular labor income and are therefore taxed at regular income tax rates. Professional gamblers report their gambling income as self-employment income, which is subject to federal income tax, self-employment tax, and income tax depending on the country.

 

LEAVE A REPLY

Please enter your comment!
Please enter your name here