Online Casino Taxation – Money and Percentage
It’s the age-old question for all types of earnings: “Why do I have to pay taxes?” First of all, it’s because the laws in all countries require you to report your income and pay a certain percentage in tax. The reasoning behind this civic duty is logical: governments collect money from taxes to support common resources, such as schools, public roads, parks, libraries, firefighters, police, and more.
But what happens with the winnings from games of luck? Winnings from casinos, horse races, raffles, lotteries, and sports betting are fully taxable in some countries. But other governments are more liberal, understanding that these activities also lead to losses. In the United States, for example, the losses may be deducted so the gamblers can pay a fair tax.
Taxation is an interesting issue to explore and compare between countries. You might be interested: how much can you win at a casino without paying taxes when gambling abroad and in your own country? We’ll explore the rules for taxation of online casino winnings in the UK, Canada, USA, and New Zealand.
Taxes on Online Casino Winnings in the UK
The United Kingdom has the most liberal taxation policy in terms of a gambling tax rate: there is none. Online gambling is completely legal, but highly regulated in this country. Under the Gambling Act 2005, the Gambling Commission is responsible for licensing and controlling online gambling sites. The activities of land-based and online casinos are additionally overseen by the Financial Conduct Authority.
The government does generate taxes from online gambling. That’s the purpose behind legalizing it in the first place. However, only the operators pay taxes, based on their area of activity. Lotteries are charged a tax of 12%, whereas bingo and casino sites pay a tax of 15% on their profits.
As a gambler, you are not required to pay taxes, even if you play professionally. You are not even required to declare your income from gambling to the authorities. Still, if you gamble professionally, we recommend talking to an accountant so you can keep a performance log. Although paying taxes on casino winnings is not needed, it’s important to maintain records to make sure that you’re not losing more than the amounts you win.
Does Canada Tax Gambling?
Canada hasn’t legalized online gambling yet. Still, players can get informed about Canadian casinos from LoopX. The country does not ban websites that are located and licensed offshore, so players can easily access them. The Kahnawake Gaming Commission has licensed over 200 gambling websites, which are available to Canadians.
Canada is very strict about its taxes. But fortunately, the regulations do not encompass online gambling. If you’re a recreational player, your winnings are tax-free.
Canada does not consider recreational gambling to be a constant source of income. The country only licenses earnings from property, employment, and other viable sources. Since Canada does not consider your gambling as an activity that earns you a living, you’re not required to pay any percentage. This policy is valid not only for winnings from online casinos, but also for lotteries, sports betting, and any other game of chance.
There’s a catch: if you win any interest on your winnings, you must report it. The state will tax the interest and will sanction any failure to declare it. You’ll need to use a gambling winnings tax calculator, figure out how much you’re making from interest, and officially declare it on a T5 form.
If you’re a professional gambler who makes a living from playing, gambling is considered your job. In Canada, the profit from these activities is fully taxable. You’ll have to keep track of your winnings and losses, and report the taxable income.
What about the USA?
The USA does not have any federal laws on online wagering. Each state is allowed to formulate its own regulations. Currently, online casinos are legal in Pennsylvania, New Jersey, Delaware, Michigan, and West Virginia. Nevada has only legalized online poker. There’s a grey area, which allows gamblers to play on websites with off-shore licenses.
The USA does impose an online gambling winnings tax of 6.75-8%. In federal-level regulations, there’s no grey area about taxes. If you’re a citizen, you have to use a gambling tax calculator and pay, even if you played on a website licensed overseas.
The IRS has specific rules that apply to casual gamblers. Players are required to fill in a Form W-2G to report their entire winnings. You are allowed to deduct the losses, but only if you kept records and prove that you’re providing a realistic estimation of your profit.
For fair and proper taxation of gambling winnings, gamblers are required to keep an accurate win and loss diary. The IRS also requires them to provide statements, tickets, receipts, and other records for proof.
Do You Have to Pay Online Gambling Taxes in New Zealand?
Although New Zealand prohibits all gambling under the Gambling Act 2003, it does not sanction its citizens for gambling on offshore websites. Since you’re in the grey area, you may be wondering: how much money can you win at a casino without paying taxes in New Zealand?
In this country, gambling is considered a hobby. The authorities do not impose any taxes on the money you win. This liberal policy encompasses online casino play and sports betting.
You should only make sure to play on websites licensed by recognized foreign authorities, which guarantee transactions with immediate payout. But be careful; you may be required to track and report your winnings on online poker. This game is an exception when played on a professional level. It’s best to talk to a registered accountant and get fully-informed.
