We live in a time where there are more opportunities to make or win money online than ever before. As well as side hustles like writing or design work, two areas that have really advanced are iGaming and cryptocurrency.
More and more casinos are coming online, offering an array of games and possibilities to win money. Meanwhile, cryptocurrency and blockchain have also come to the fore, providing opportunities ranging from play-to-earn games to crypto trading and investment.
Individuals need to be aware of the tax implications of their winnings and earnings, which differ from one country and jurisdiction to the next.
iGaming Winnings
iGaming includes online casinos, poker rooms, and other real money games including bingo. Players can visit sites like Lucky Block, register, and play an increasingly wide variety of games with the potential to win real cash.
Prizes depend on the game played, the size of the stake, and other factors. While some prizes can equate to a few pounds, progressive jackpots can pay out huge prizes, even as high as millions of pounds.
Online casinos are convenient, can offer instant deposits and withdrawals, and offer variety. Depending on where you live, you may have to pay tax on those winnings, however.
UK
The UK government regulates online gambling and takes taxes and license fees from the casinos themselves. UK players do not have to pay tax on any gambling winnings, whether it’s a multi-million-pound lottery win or a £20 win on the slot machines. This also means that UK gamblers cannot deduct any gambling losses from their income taxes, however.
USA
Tax requirements in the USA are more complicated, primarily because state laws can differ. First, players need to be aware of local gambling laws. Gambling is completely illegal in two states, and iGaming at online casinos is currently only regulated in seven states. Online sports betting is more widely regulated.
Federal laws dictate that gambling winnings are fully taxable – effectively, they are treated as income for tax reporting. As such, gamblers should declare all of their winnings when completing tax calculations.
For large wins, casinos might deduct 24% of the winnings immediately, and hand this over to the IRS. The player may need to pay more tax on the winnings, or they may be entitled to reclaim some of that money back, but it ensures that the IRS gets some of the winnings straight away.
This is not necessarily the case, however, when playing some table games because the casino cannot reasonably determine how much money a player has won, or lost, overall, at the roulette wheel or when playing blackjack.
Losses are deductible, which means players only pay tax on overall winnings. Players should keep records of all their bets, including wins and losses, to make tax declarations easier.
Canada
Canada has slightly different iGaming tax laws, too. iGaming is regulated, and some people will have to pay tax on their winnings from any source of gambling, including online casino gambling.
Casual players are not liable to pay tax on their winnings, while professional gamblers are liable. Whether you qualify as a professional gambler is not determined by the number of winnings: you could, after all, win a progressive jackpot with a single go on an online slot machine.
A professional gambler is considered somebody who gambles regularly, uses a strategy or specific skills to earn profit, and for whom gambling is a primary source of income.
Casual gamers do not need to declare their winnings, whereas professional gamblers need to declare winnings and losses as business earnings. In most cases, if you play games that are predominantly based on luck, including playing slot machines, you are unlikely to be considered a professional gambler. If you play poker regularly, and especially if you regularly make profits from doing so, you may be considered a professional and be liable for taxes.
Crypto Earnings
A lot of online casinos have started accepting and paying out in cryptocurrency, especially thanks to the anonymity and privacy it offers. Cryptocurrency can also be traded and invested in, which means that it has tax implications and requirements of its own.
It is still an emerging technology, and many governments and financial agencies are still scrambling to determine the best way to regulate and treat cryptocurrency. In most cases, cryptocurrency itself is not taxed, so buying and holding cryptocurrency does not lead to any taxation.
However, individuals who receive crypto payment for services or products are taxed in the same way as if they had received fiat currency. And, any profits that individuals make from trading or selling cryptocurrency will likely be taxed as capital gains.
UK
There is no specific tax on cryptocurrency in the UK, but it may be subject to either income tax or capital gains tax. If you are paid cryptocurrency as a salary or for completing work, it should be included as part of your annual income when filing tax returns.
However you earn it, you may be liable to pay capital gains tax on any profit made while holding the crypto. This can be pertinent to online gamblers who use cryptocurrency. While you won’t pay tax on the winnings, if you receive Bitcoin valued at £10,000 when you withdraw from a casino, and then hold it before selling it for £15,000, you will likely have to pay capital gains tax on the £5,000 profit.
USA
Similarly, in the USA, cryptocurrency is treated as property which means it may be subject to capital gains tax or income tax, or potentially even both. If you receive cryptocurrency as earnings, this will be taxable along with the rest of your income at financial year-end.
If you invest in or trade cryptocurrency, you may be liable for capital gains tax. Losses can usually be offset against profits, however, which means crypto users should keep in-depth financial records of all their trades as these will prove invaluable at year-end.
Canada
Canada is considered a crypto-friendly country and has an advanced cryptocurrency and crypto tax framework. Cryptocurrency is subject to income and capital gains tax in Canada.
100% of crypto earnings are subject to income tax and 50% of crypto profits are subject to capital gains tax.
Furthermore, brokers and exchanges are required, by law, to report to the CRA, which means the authorities will find out about any potential crypto profits, and investors need to be prepared to file returns to ensure they aren’t hit with fines and other penalties.
Conclusion
iGaming and cryptocurrency are emerging technologies. One is most often seen as a form of entertainment, with iGaming players enjoying betting on slots and other games of chance, the other, cryptocurrency, is treated as an asset or property.
While the rules on iGaming taxation do vary, with countries like the UK not charging any tax on winnings, cryptocurrency itself is not directly taxed in most jurisdictions. However, profits from trading cryptocurrency, and any payment or salary received in cryptocurrency are subject to the same tax liabilities as fiat payments.
