Cryptocurrencies have changed the way we carry out financial activities globally. Their introduction has paved the way for a borderless, permissionless, more secured, and decentralized way of transacting globally.
Crypto betting sites are one of the sectors that cryptocurrencies have revolutionized. With crypto betting platforms like Coinplay online betting sites, gamblers can play their favorite poker, slot, or table games with cryptocurrencies. This will remove the long wait for transaction processing, expensive fees, and centralized features of traditional payment methods.
However, despite their anonymity and privacy, some countries still have stringent rules around crypto betting sites and taxes. In this article, you’ll learn more about taxation and tax rules surrounding crypto gambling with Bitcoin and how you can easily file them.
How Taxes Work in Crypto Betting Sites
Cryptocurrency casinos are relatively new; therefore, many tax laws surrounding them are also new. Meanwhile, many tax regulations on Crypto gambling worldwide are subjected to the gains made from betting. In fact, before the introduction of cryptocurrencies in casinos, some state laws and jurisdictions imposed taxes on digital assets.
However, in some countries, cryptocurrencies are not considered an official currency but property. Therefore, the imposition of tax depends on the loss or gains made from investing in your digital assets.
In states with strict gambling taxation laws, the anonymity feature of Blockchain technology can be alluring and enticing. In fact, many people try to evade tax since Blockchain transactions cannot be tracked. Unfortunately, tax evasion is a huge felony that could lead to serving jail time or excessive fines.
In the US, winnings from an online crypto sports betting or crypto casino are treated as every other income or capital gain. Depending on your gain, the tax rate on crypto winning ranges from 0% to 37% at the state and federal levels in the US.
However, if the crypto betting site is US-based, 25% of your winnings will be withheld as estimated taxes. Depending on your normal tax rate, you may still have to pay more or less. Whichever way it is, only you can file for taxation on your crypto gambling winnings.
If you need any help filing taxes on your crypto gambling winnings or crypto investment gains, you can discuss further with your tax accountant to ensure you’re not flouting any law.
Crypto Betting Site Winning Tax
Many countries don’t have strict tax rules or regulations for crypto casinos. Countries such as the UK, Belgium, Germany, Denmark, Australia, Canada, France, and Malta do not exert any tax on crypto gambling winning. However, there are tax rules on professional gambling in these countries.
However, the US, China, Spain, Mexico, and India have strict tax rules governing crypto betting winnings. In the US, if you register on a crypto betting site or a sports booking site with your KYC details or SSN, your winning is subject to a 25% tax. However, if you choose to remain anonymous, the gambling platform will remove 30% of your winnings.
The crypto betting site usually reports winnings to justify their deductions to their users. Therefore, you must audit your tax with the proper documentation from your crypto casino as evidence that you’ve paid your tax. This is why using reputable crypto casinos like Coinplay site is recommended.
Tax deductions also cover rewards, including prizes and bonuses that qualify for taxation. Winnings with offshore crypto casinos may go unnoticeable to the tax department of a country. It is still compulsory to pay taxes on your winnings if you’re using a non-US crypto sports betting or crypto betting site.
How to Process Tax for Crypto Gambling Winning
Usually, taxpayers always pay a certain percentage of their annual income for tax or whenever they make a profit from any investment. However, the amount of tax to pay solely depends on the cryptocurrency’s price.
When you exchange the winning from a crypto betting site to fiat currency, the tax will be calculated as a difference between when you wager the asset and when you got back your winning. Therefore, the tax proceeding is your total winning and the cost basis (initial investment plus any fees).
Writing Off Loss from Tax
Taxpayers can deduct any gambling loss from the total amount of tax they can pay. However, this is only possible if the winning amount is greater than the loss. Meanwhile, writing off a crypto gambling loss on tax is only possible for crypto winning. Therefore, taxpayers cannot offset gambling loss on any other income or investment.
For instance, if a gambler makes $5,000 as profit and loses $1,500, the tax will be subjected to the remaining $3,500. All in all, gamblers cannot deduct more loss than the profit they had.
Tax for Professional Gamblers
Professional gamblers are people who make their living from gambling. They’ve mastered the art of winning and making money from various forms of casino games. Professional gambler’s income is subject to taxation in many countries, especially countries that subject regular crypto winning to taxes.
In the US, taxes for professional gamblers are calculated similarly to that of regular gamblers. They also have the chance to deduct losses from the taxes. Apart from this, professional gamblers can file for Schedule C and register themselves as self-employed. This way, they can deduct other expenses, including internet and travel expenses, for their taxable income.
It is imperative for crypto betting site users to know and get familiar with the laws of their state on important gambling laws, especially tax laws. Evading tax laws can lead to serious problems under the law, and the implications have greater negative impacts.