You recently had a surprising windfall while playing at your favorite online casino and are wondering whether your gambling winnings are taxable? Well, the answer to this question largely depends on where you live.
The legislative frameworks of some jurisdictions treat gambling winnings as taxable income, levying separate taxes on recreational and professional gamblers.
In other countries, gamblers are fully exempt from any levies and licensed gambling businesses are the only ones to shoulder the burden of taxes. Furthermore, tax rates vary wildly from one jurisdiction to another when in place, which further adds to the confusion.
The following publication provides concise answers to several questions:
- Where are gambling winnings tax-free?
- Which countries levy taxes on players’ profits?
- What are the tax rates in different jurisdictions?
Let’s kick things off by answering the first question.
Countries Where Online Gamblers Go Tax-Free
Many countries do not impose taxes on sports bettors, casino goers, and lottery fans largely because they treat gambling as a form of entertainment rather than a professional activity.
Furthermore, recreational players cannot rely on gambling as a source of income since the odds are skewed against them so that they inevitably suffer losses in the long term.
There is no need to worry about paying taxes on your casino winnings if you reside in a tax-free jurisdiction like those listed below. Instead, the taxes are passed onto licensed gambling operators and as you shall see, the rates vary from one market to the next.
Taxes on Gambling Winnings in the US
The US witnessed an unprecedented gambling expansion over the past several years. Many states have already passed legislation to legalize and regulate online gambling in one form or another. Sports wagering is now legal in around 30 states, 18 of which allow it in both retail and online format via licensed websites and mobile apps.
Remote casino gaming appears to be significantly less popular among US legislators as very few states have passed laws to regulate these activities. Interactive games of chance are currently legal in Connecticut, New Jersey, Michigan, Nevada, and Pennsylvania.
Taxable Forms of Gambling in the US
Thresholds on Taxable Gambling Winnings
US Tax Brackets
Taxes Imposed on Professional Gamblers
Taxable Forms of Gambling in the US
On the downside, the profits of gamblers are fully taxable here, not to mention dealing with taxes is notoriously complex in this jurisdiction. The Internal Revenue Service (IRS) collects taxes from all gambling-related winnings, including those from:
- Casino gaming
- Horse racing
- Retail and online sports betting
- Lotteries
- Bingo
- Tournament poker
- Sweepstakes
- Television game shows like Jeopardy! and The Price Is Right
- Non-cash prizes are taxed based on their fair market value
Thresholds on Taxable Gambling Winnings
Gambling winnings are taxable on a federal level but only on condition they exceed specific thresholds. The gambling operator must then deduct 24% of the overall amount won for tax purposes. Winners also receive copies of Form W-2G to fill out and send to the IRS.
The payer will deduct 24% from the player’s profits and send the amount directly to the Internal Revenue Service. However, this percentage is an estimated tax only, i.e. a gambler may end up owing more or less depending on their overall annual income.
Profits generated from skilled-based games like poker or blackjack are not deducted on the spot but players must still report them as personal income and pay the corresponding tax.
Some table games like roulette and craps are treated as games of skill rather than chance, despite the fact their outcomes are fully random and unpredictable. US gambling operators are not required to issue the W-2G form to gamblers who win substantial amounts in such games.
The differentiation between chance-based and skill games does not absolve gamblers from reporting their profits from table games to the IRS. It is highly recommended to do so when filing your taxes at the end of the tax year.
US Tax Brackets
| Tax Percentage |
Taxable Income for Single Filers |
Taxable Income for Spouses Filing Together |
| 10.00% |
US$10,275 |
$US20,550 |
| 12.00% |
US$10,276 to US$41,775 |
US$20,551 to US$83,550 |
| 22.00% |
US$41,776 to US$89,075 |
US$83,551 to US$178,150 |
| 24.00% |
US$89,076 to US$170,050 |
US$178,151 to US$340,100 |
| 32.00% |
US$170,051 to US$215,950 |
US$340,101 to US$431,900 |
| 35.00% |
US$215,951 to US$539,900 |
US$431,901 to US$647,850 |
| 37.00% |
More than US$539,900 |
More than US$647,850 |
The IRS adjusts the tax brackets annually, typically upward, to account for the fluctuations in the cost of living from year to year.
Looking at the tax brackets above, unmarried gamblers must have an annual income (with winnings included) of more than US$170,050 to owe taxes over 24%. They may even get some of their money back if their total income for the year is below US$89,076.
US players must report their gambling profits in the Other Income section of Form 1040. Gamblers aged 65 or higher can alternatively use Form 1040-SR.
Taxes Imposed on Professional Gamblers
If you live in the US and gambling is your main or only source of income, the system will treat you as a professional gambler. As such, you will be taxed at the regular effective tax rates. Professional gamblers are basically self-employed and must report their profits and losses on Schedule C of Form 1040.
Non-Resident Gamblers Also Pay Taxes
Another peculiarity of the US tax system is that it enforces taxes on gamblers who lack US citizenship. Foreign nationals are divided into two groups – resident and non-resident aliens.
Resident Aliens
Non-Resident Aliens
Resident Aliens
Resident aliens are non-citizens who have lived in the country for at least 31 days during any given year or 183 days within the past three years. Visa and green card holders also belong to this category. Resident aliens are taxed at the same rates as US nationals.
Non-Resident Aliens
Non-resident aliens either lack green cards or have failed to pass the substantial presence test, i.e. they have spent less than 31 days on US territory during a given year. Nonetheless, such individuals are taxed on all income they generate within the country.
The progressive tax system we wrote about earlier does not apply here as non-resident aliens are taxed at fixed rates of 30%. Unlike US citizens, such foreign nationals cannot deduct their gambling losses.
An exception is made for Canadian nationals due to a treaty between the two neighboring countries. Thus, Canadian residents who visit the US and gamble there can deduct their losses up to the amount of their earnings. The same applies to US citizens.
A player may avoid taxation if they have spent $3,000 to earn $3,000. The same goes for a losing gambler who has wagered $2,500 but won only $1,500. Because of this, record-keeping is essential and gamblers should put down both their gains and losses.
Other Countries That Levy Taxes on Gambling Winnings
The US is hardly the only country to impose hefty taxes on gambling winnings. Its southern neighbor, Mexico, also enforces taxation on gamblers’ profits and so do several other countries on the other side of the pond.
The tax rates are significantly lower than those in the United States, at least in most cases.
