You recently had a surprising windfall while playing at your favorite online casino and are wondering whether your gambling winnings are taxable. 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, when they exist, vary widely from one jurisdiction to another, 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 enthusiasts, 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, and 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 on to licensed gambling operators and, as you will see, the rates vary from one market to the next.
Taxes on Gambling Winnings in the US
The United States has witnessed unprecedented expansion in gambling 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 roughly 30 states, 18 of which allow it in both retail and online formats via licensed websites and mobile apps.
Remote casino gaming is far less popular among U.S. 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
Unfortunately, gamblers’ profits are fully taxable here, and navigating tax obligations in this jurisdiction is notoriously complex. The Internal Revenue Service (IRS) collects taxes on all gambling-related winnings, including:
- 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 at the federal level, but only when they exceed certain thresholds. The gambling operator must then withhold 24% of the total amount won for tax purposes. Winners also receive copies of Form W-2G to complete and send to the IRS.
The payer will withhold 24% of the player’s winnings and remit the amount directly to the Internal Revenue Service. However, this percentage is only an estimate, meaning a gambler may end up owing more or less depending on their overall annual income.
Profits generated from skill-based games like poker or blackjack are not withheld at the source, 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, even though 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 fluctuations in the cost of living from year to year.
Based on the brackets above, unmarried gamblers must have an annual income (including winnings) greater than US$170,050 to be taxed at more than 24%. They may even receive a refund 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 older can alternatively use Form 1040-SR.
Taxes Imposed on Professional Gamblers
If you live in the United States and gambling is your primary or sole source of income, the tax system treats you as a professional gambler. You will therefore be taxed at the regular effective tax rates. Professional gamblers are essentially 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 U.S. tax system is that it imposes taxes on gamblers who are not U.S. citizens. 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 a given year or 183 days within the past three years. Visa and green card holders also fall into this category. Resident aliens are taxed at the same rates as U.S. citizens.
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 in U.S. territory during a given year. Nonetheless, such individuals are taxed on all income they generate within the country.
The progressive tax system discussed earlier does not apply here, as non-resident aliens are taxed at a flat rate of 30%. Unlike U.S. citizens, these foreign nationals cannot deduct their gambling losses.
An exception is made for Canadian nationals owing to a treaty between the two neighboring countries. Therefore, Canadian residents who visit the United States and gamble there can deduct their losses up to the amount of their earnings. The same applies to U.S. 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 track 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.
