If you are wondering whether gambling winnings are taxable, the short answer is yes. However, it depends on the country or state where you gamble. There are countries where players don’t pay any tax on their gambling winnings, for example, Italy, Singapore, and Australia. By contrast, countries like Poland impose taxes on poker winnings. Others like Canada require only professional gamblers to pay taxes.
Understanding Taxation on Professional Gamblers
For taxation purposes, some countries treat professional gamblers differently from casual gamblers. They consider professional gambling to be a career or a trade that provides income, hence is taxable. If you are a professional gambler in Canada, you should file tax reports on your gambling winnings. In the US, however, you pay taxes whether you are a professional or an amateur gambler. The only difference is that amateurs pay a flat-rate tax of 24%, while professionals pay a progressive tax rate depending on their gambling income.
Who Qualifies to be a Professional Gambler?
How do countries distinguish between a professional and an amateur gambler? One way they differentiate is by checking the gambler’s source of income. Professional punters make their income solely or majorly through gambling activities. Other ways include:
- Assessing the expertise of the gambler
- Evaluating their success rate
- Assessing the effort and time the gambler uses in gambling activities
- Checking the amount of income the punter gets from gambling.
Which Countries Tax Professional Gamblers?
The rules and regulations governing the taxation of professional gamblers vary from country to country. Here are a few countries that tax professional gamblers.
- New Zealand
Recreational punters can play tax-free in New Zealand. But if the gambler has barely any other sources of income, he is considered a professional hence is subject to taxation.
- United States
In the US, professional gambling is treated as an income-generating activity thus is taxed the same way as regular income. The taxation rate is progressive, depending on how much the gambler makes.
- Canada
Professional gambling is taxable in Canada, although not all forms of gambling. The list of taxable gambling income includes land-based casino betting, sports betting, bingo, pool, and poker. Lottery games, raffles, pull-tabs, and scratch-and-wins are not taxable in Canada.
Finally, countries that tax both professional and casual gamblers include Slovenia, The Czech Republic, Poland, and the Netherlands, among many more.
Do Professional Gamblers Get Tax Deductibles?
Some countries allow gamblers to claim tax deductibles on their gambling losses. The losses should, however, not exceed the gambling winnings. For example, say you won $60.000 but lost $70.000. You can only get tax deductibles of up to $60.000. The process of claiming tax deductibles varies from country to country. The IRS, for instance, requires professional gamblers to claim tax deductible by itemizing their deductions on Schedule A of the IRS tax form.
Which Process Do Professional Gamblers Follow to Pay Taxes?
Countries that impose taxes on professional gamblers require them to keep a log of their gambling activity. If you are a professional gambler, you need to keep a record of the following information:
- The gambling activities you engage in
- The names and addresses of the bookmaker or casino site where you gamble
- The people you were with when gambling
- The number of profits or losses you made.
Final Remarks
Law and regulations regarding taxation of professional gamblers vary from one country to another. Some countries like the UK and Australia don’t tax punters, whether amateurs or professionals. Other countries like Canada tax only professional gamblers while others such as the US tax both casual and professional gamblers. A professional gambler is one that gambles for a living, and in some countries, these people are allowed to claim deductible if they make gambling losses.
