Paying tax on gambling winnings

Since Bitcoins have captured a lot of market in today’s world, so it is essential to look after the issues like what if it is being used for wrongful purposes, i.e. tax evasions or to convert black money into white.

In gambling, payments are hugely being made in the form of cryptocurrency like bitcoins. Nowadays more and more of us are using cryptocurrency on bets in sports games, casino games, and different events. But it is essential to report your wins and losses to the Internal Revenue Services (IRS).

With an increase in cryptocurrency-based gambling, it is essential that users must be aware of the tax regulations, which are imposed by the authorities. Many of the users of bitcoin in gambling industry have been using it for years now. It is stated that dozens of actively being used wallets are linked to cryptocurrency gambling platforms. According to some expert, out of 60% of the bitcoin transactions, 337 transactions per second are gambling related. Even an Irish company has launched bitcoin lottery which is competing companies like Mega Millions and Powerball.

Why bitcoins in gambling?

There are plenty of reasons for which gambling companies use bitcoins;

Cryptocurrencies are fast to transact and less time taking than banking wires;

Every transaction is publicly available, which makes it more clear and transparent;

Payment processing fees are very low and sometimes virtual transactions and virtually free.

How are cryptocurrency wins taxed?

Everyone who wins gambling money or wagering money is obliged to pay taxes. These taxes are not only applicable on wins in card games, casinos, sportsbooks but also on money earned in gameshow wins, racetrack bets, lotteries or even Bingo.

Gamblers must be aware of the taxable laws that apply to the gambling wins. Taxes apply to traditional cash, prizes, and cryptocurrencies. Winning bets create taxable income. IRS requires 25% of winning money to be deposited as tax money. Sometimes gambling sites or casinos withhold tax money for their customers. In such cases, they are given a W-2G form, on which they report how much money has been won and how much tax is withheld. If you do not receive this form, you cannot make it an excuse to get away from paying taxes; you are responsible for reporting the tax money to IRS yourself in such cases.

Gambling losses and wins are treated separately. Gambling losses are deducted from your taxable income. But note that gambling losses can only be deducted up to the amount of your total gambling winnings.

For professional gamblers rules are different, effective income tax is applicable on their money instead of typical 25% rate, which applies to most of the wins. But to be sure, which tax rules can affect your income you must consult a qualifies tax professional.

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