How Do Taxes Work With Online Gambling?
January 11, 2021
With sports betting becoming more available across the world, gamblers wonder what to do if they strike it big at the sportsbooks on their tax return. Do I have to report gambling winners to the IRS? Well, the short answer is yes. The long answer is a little more complicated.
The laws and processes can vary depending on where you live, but it is essential to go to any online severe sports bettor to know the tax implications of gambling winnings.
This article will focus on residents and citizens of the United States, but much of the advice will apply to you regardless of your location. However, it is essential to be aware of your local laws regarding online gambling and consult a tax professional if dealing with large amounts of sports betting or gambling income.
Online sports betting taxes and money won from betting sports works the same as any other gambling income: you must pay taxes on it.
If you win money in a state with regulated sports betting, then the sportsbook will send both you and the IRS a 1099-MISC. This is automatically done if you win $600 or more, but even if you don’t receive the tax form, you are legally required to report your gambling income (of any amount) to the IRS or state government.
Even if you’re betting with an offshore sportsbook or your neighborhood bookie – your winning is taxable. No matter where you win your money gambling, you must pay taxes on it.
Things can be different if you file as a professional gambler, but this is not the case for most of you reading this article.
How Much Money In Taxes Do You Pay On Sports Betting?
Local and state tax rates can vary on gambling taxes, but when you file out your Form W-2G with the IRS, all gambling taxes, including online gambling taxes, are levied at 24 percent. There is no progressive tax, like regular income with gambling income. It is all taxed at a flat rate.
Of course, this is the law under the tax code of the United States. Gambling laws and taxes may vary in other jurisdictions. For example, Canadians do not have to pay taxes on gambling winnings.
Should I Avoid Paying Taxes On Gambling Winnings?
It’s not advisable to do so for the legal risks involved with not paying taxes. It is unlikely that you would be charged criminally, but the fines and penalties can be expensive. You’re taking a lot of unnecessary risk by not paying, especially if you become an extremely profitable sports bettor.
Online Sports Betting Tax Advice
Our primary advice is to pay your taxes, but are ways to keep track of your wins and losses that make it much easier to prepare your tax forms and be sure that you input the correct information on your tax returns. However, there are a few other recommendations for making it easier on yourself come tax time.
Keep Gambling Records
This is a must if you file as a professional gambler but can help all bettors who want to track their wins and losses. It’s not only a good idea for tax purposes but an excellent way to track your progress as a sports bettor and see where you are most profitable. You can group them with sports and markets.
Be Aware Of The Tax Laws In Your Region
We mentioned it above, but it bears repeating. The more knowledge you have about your tax laws and gambling tax laws, the better prepared you will be to file your taxes without issue. You don’t need to be an expert as a beginner, but extra knowledge can’t hurt you.
Hire A Professional If You’re Making Bank
Doing your gambling taxes as a small-timer makes sense, but when you’re doing it for a living, or you’re making serious money, then it’s probably time to hire a professional. Many lawyers specialize in taxes for professional gamblers.
While there will undoubtedly be some fees, you can be assured your taxes will be done correctly and give yourself peace of mind with your return.
Paying Your Online Gambling Taxes
If you’re betting online or offline, you will owe taxes on your gambling winnings. The negatives simply outweigh the positives when it comes to declaring your online gambling income. With just a little research or the help of this betting taxes guide you can quickly learn the laws and regulations for paying online sports betting taxes in your country or state. If your gambling becomes a business or a significant portion of your income, again, we recommend taking it to a tax professional.