Congratulations! You’ve had some success with online sports betting.
But before you spend, or save, that extra cash, there is one thing you need to keep in mind—taxes.
The biggest question you have is most likely, “Do you pay taxes on online sports betting?”
Unless you’re a tax pro, chances are you could benefit from some guidance on sports betting come tax time.
We’ll walk you through:
How to figure out if you have to pay sports betting taxes
How to keep records for your online sports betting
How to report your winnings
How To Know if You Have to Pay Sports Betting Taxes
This will strictly vary from country to country—there is no catch-all law for reporting betting taxes, unfortunately.
In countries where it is legal, like the United States, there are still many different rules and regulations both for bettors and online sports betting sites and apps.
Sometimes betting establishments, like casinos, legally have to pay tax on their profits.
In some cases, the bettor must also pay tax on their winnings.
Taxes can vary greatly—and it all depends on how you file and how much your “gambling income” is.
Is Sports Betting Tax-Free?
Typically, sports betting is not tax-free.
However, it does depend on your total winnings and where you are betting from.
There are a number of countries where gambling is legal but only the casinos and bookies pay taxes, which means you wouldn’t be taxed on your winnings.
A few of these countries include:
Certain countries require casino operators to pay license fees in addition to taxes on gambling, but the exact numbers they’re required to pay will vary from state to state.
For example, states can choose to base their gambling taxes on:
However, in the United States, bettors are required to pay taxes on all of their sports betting winnings.
So, whether or not you receive a W-2G, the income you “earned” is required to be reported on your income tax return.
In the US, reportable gaming income includes:
Because the laws vary so drastically from country to country, it’s best to play it safe and consult a tax professional.
Does an Offshore Account Exempt You From Paying Sports Gambling Taxes?
It’s common for bettors to think that if they’re holding funds in an offshore account in an online gambling site, that the money is not yet considered taxable.
However, in the United States, the IRS has stated that citizens “…are taxed on income that is available to you, regardless of whether or not it is in your possession.”
This means that while you could argue that the money in your offshore betting account isn’t readily available or “in your possession”, you are still able to access the money to place bets and continue earning profits and therefore are required to pay taxes on it.
Because offshore accounts are still visible to federal tax agencies, they should never be used as a way to shelter money from taxes.
But remember, this is just the case in the United States.
If you are placing bets and paying taxes in another country, you will likely face different tax regulations regarding sports gambling taxes.
Online Betting Taxes: Keeping Records for Tax Time
Just like laws vary for reporting and recording your gambling wins and losses, there are a handful of countries that require no gambling tax for online sports betting.
A few of these include:
The United Kingdom
In the UK, players do not pay taxes on their online sports betting winnings. Instead, gambling sites pay a 15% levy on their earnings.
Still, for countries who do require you to keep a record of your winnings, keeping track could be migraine-inducing.
Lucky for you, ZenSports uses cryptocurrency and blockchain technology, which makes tracking all of your bets—and winnings— quick and easy.
Tracking Wins and Losses
The requirements of how you must track your wins and losses can vary depending on the country.
Let’s take a look at how the United States requires you to keep a record of your betting results:
American bettors need to keep a diary or log of both their winnings and losses. The diary would need to contain the following:
The IRS recommends that bettors keep other supporting documentation, including:
Additionally, it’s important for bettors in the United States to record their wins and losses in the appropriate sections and not to record their net profits in the “Other Income” line.
Can You Write Off Losses on Your Tax Return?
Assuming we’re still looking at American bettors, the answer would be yes.
The losses are reported as an itemized deduction, which is reported under Schedule A.
However, every country is different and whether or not you can write off your losses will depend on the tax laws.
Can You Get in Trouble for Not Reporting Wins and Losses?
Fraudulent tax returns are illegal almost everywhere.
We always recommend that you follow applicable laws where you live and bet.
How to Report Sports Gambling Winnings
Just like whether you need to pay taxes on your online sports bet winnings, how to report them also varies greatly depending on your location.
For peace of mind and to maximize reporting and filing properly, we recommend consulting a tax professional on how to report sports gambling winnings.
If you feel confident, you could also research your own country or state’s specific tax laws yourself and follow those steps.
One thing that is, for the most part, common across the board is that your taxes on online sports betting will vary depending on if you file as a professional gambler or if you file as a recreational gambler.
Keep reading to see what the difference is and how it can affect your potential taxes.
Taxes on Online Sports Betting as a Hobby
Chances are, the vast majority of gamblers will be filing as recreational gamblers or those who bet as a hobby.
But ultimately, the percentage you will be taxed, if you are taxed at all, as a recreational bettor largely differs depending on your country.
Taxes on Online Sports Betting as a Professional Bettor
The rules and reporting methods for professional gamers are typically different than those who bet as a hobby or pastime.
However, in some countries, like Italy, the online betting tax structure is based on profit.
The tax rate is 20% for…
…while the rate increases slightly to 22% for sports betting.
However, some countries may view professional gamblers as being engaged in business and require them to report their gambling income differently.
In the United States, for example, those who file as professional bettors can net their wins and losses for the year.
However, professional bettors will need to prove their status as a professional.
The IRS will look at and take into consideration:
The adequacy of accounting and record-keeping
The expertise of the gambler
The years of betting experience
The time and effort expended in carrying on the activity
The overall success
The history of losses with respect to the activity
Consult your country’s tax laws to be sure if there are any different requirements for filing or reporting your online sports betting winnings as a professional versus recreational bettor.