Tax on Online Casino Winnings

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The question of whether or not winnings at online casinos are taxable or not is one that comes up quite frequently in player circles and it is an issue that seems to confuse novice and experienced gamblers alike. Just visit any player forum and you’re sure to find all sorts of advice on the matter, some of which only adds to the confusion.

So we’ve decided to help set the matter straight and seek to answer this question clearly once and for all.

In short, the answer is that whether or not you are liable to pay tax on your online casinos winnings will depend very much on the country that you are based in. It is therefore very important to do specific research into your tax obligations as set out by your country of residence as they do differ quite considerably across the globe.

Online Gambling Tax in Europe

In most countries in Europe like Austria, Belgium, Bulgaria, Czech Republic, Denmark, Germany, Hungary, Italy, Luxembourg, Malta, Romania, Sweden and the UK, players who are citizens of these countries are not required to pay tax on their gambling winnings provided that the online casino in question is licensed and regulated within the EU.

In the countries mentioned above, winnings from online casinos are seen as incidental rather than an income. These governments realize that players generally lose more than they win and if they did tax wins, they would also have to allow some kind of tax relief for losses, which of course would be very unprofitable. In addition, enforcing taxation on online winning could be very difficult to do – imagine if governments had to chase down every £100 win so that they could get their share? It would be an administrative nightmare!

There are however some countries within the European region that do require players to report winnings (like in Spain) and some to pay tax on these. It is therefore important to check with your local revenue services department and/or accountant as to whether or not you’re liable for tax payments on any money you win at online casinos. Rather do a bit of research than end up facing a hefty fine.

Gaming Tax in the US

While online gaming is still a very grey area in the US, three States currently allow internet gambling (New Jersey, Nevada and Delaware). According to the IRS, winners are taxable by both the IRS and at a state level. All winnings from gambling are seen as a form of taxable income and must be declared on the tax return. Likewise, losses are deductible up to a certain percentage and must be detailed on tax forms.

Gambling Tax in Australia

In Australia, any winnings accrued at online casinos are seen to be the result of luck and as such are not subject to tax.

What about Professional Gamblers?

In Europe and Australia, at present governments do not distinguish between occasional and regular gamblers. In the US however professional gamblers are seen as self-employed and are taxed accordingly.

When professional gamblers complain about the amount of tax they pay, this may be confusing because their winnings are not subject to taxation in the EU and Australia. The fact that they pay taxes may be due to the fact that they are citizens of a country that does tax gambling wins, or more regularly, they are taxed on earnings from promotional work and appearances that they participate in.

Taxation of Operators

While European and Australian governments do not tax players, they still make money off online gambling activities as they tax the online casinos and sportsbooks operating in their jurisdictions, just as they do land based operations. Obviously this cost is an operating expense, but thanks to the lower overheads at online operations, these costs are not always passed along to the public through worse betting odds as they are in land based venues.

As you can see, it is of the utmost importance that you regularly investigate your tax obligations when it comes to online casino winnings to ensure that you remain on the right side of the law at all times and can continue to enjoy a rewarding online gambling experience.