Do I Pay Tax When I Play Online Casino
If you think you are taking away that five million dollar mega jackpot win without paying taxes on it, then you need to think twice.
21:22 09 January 2022
It doesn’t even have to be until you win a jackpot. You have to pay taxes on any winnings you make from any gaming online.
This isn’t just a reality peculiar to the United States alone. It has just been a standard taxation principle worldwide since the inception of online casinos. If you are new to all these tax implications, here are a few things you need to know.
Tax Regime Differs from Territory to Territory
The country from which you are playing will determine the tax regime that applies to your winnings from an online casino. It doesn’t matter where the casino itself is operating from. For instance, in the United States, you have to be the one going to the IRS to file a report of your winnings, especially when they exceed certain amounts.
For poker tournaments, the threshold is a winning exceeding $5000, while for slot machines, you must file a tax report if your winning exceeds $1200. The threshold for the keno game is $1500, while it is $5000 for horse racing. Regardless, every other win not meeting this threshold must also be reported so as not to be liable for tax evasion.
The only difference between the threshold winnings and the non-threshold is that the casino itself is mandated to report such winnings. The standard rate for federal taxes is 25%, and such a win is also subject to other state taxes in the United States.
Furthermore, in India, the tax regime is quite different. The tax deduction is quite automatic on all winnings, as the casino operators automatically deduct the standard 30% TDS on all winnings. Therefore, the player need not worry as the taxes are automatically paid, and they no longer have to go through the trouble of filling out any reports. The 30% deduction is an income tax on gambling, and the winnings are further subject to other surcharges.
Surmounting the Tax Implications
For some players, playing casino games is just a leisure activity, while it is a vacation for others. Those playing certain games in casinos or in game tournaments as a profession or vocation are called professional gamblers. They have somewhat different tax regimes applicable to their winnings.
These regimes are quite similar across the globe. The fundamental highlight of the systems is that they allow the professional gambler to deduct some costs before the winnings are subject to taxation. However, you can only be referred to as a professional gambler after announcing gambling as your occupation.
It is not for the state to see you as one. Once gambling is your major source of income, all reasonable expenses that you may reasonably incur as related to the occupation are tax-deductible. The extent of deductibility varies from country to country and even from state to state within a country. You may want to consult a tax expert if you are looking to become a professional gambler.
Use Only Licensed Casinos
There are probably hundreds of thousands of online casinos scattered across the globe, but they are not fully licensed. You have only to seek out the licensed ones and stick to them. When it comes to taxes, the government doesn’t joke with them. With licensed online casinos, like Just Spin online casino, the requirement for taxes and deductible standard rates is often part of the terms and conditions of the website.
At other times, the deduction is automatic, leaving the casino responsible for returning these taxes to the government. However, with the unlicensed ones, you may end up earning money you might not be able to account for in the long run, and you may expose yourself to criminal liabilities like money laundering, online fraud, and tax evasion too.
It is important to mention that the mix-up that trails online casinos sometimes could be the inability of the player to differentiate between different online casinos. Some offer just free games and charge a fee for that without any possibility of earning real money, and others are real-money online casinos whose winnings have to be subject to payment of taxes and surcharges.
You know it isn’t right to earn so much and not give anything back in taxes, right? Therefore, while enjoying all the fun and games, try to evaluate what kind of lifestyle you want from the drill. Do you want to be a professional gambler to enjoy some cost exemptions, or do you want to be a recreational gambler whose winnings are subject to all applicable taxes? The choice is yours to make.