Cryptogambling and taxes: everything you need to know about how bitcoin gambling taxes work
Cryptogambling is growing at a very fast pace across the world, including the United States, where the adoption and use of bitcoin and other less popular cryptocurrencies for gambling is gradually becoming mainstream. With more and more cyptogambling sites making their presence in the industry, the best of which are listed on CryptogamblingTV, people have many options and options to choose from when they want to gamble.
But bitcoin gambling is relatively new, and the ways in which it works and is processed, when gambling winnings are generated, are still unclear and confusing to many of you. Many gamblers wonder if their winnings are taxable, how they can be taxed for bitcoin received from gambling, what are the main bitcoin gambling taxes and generally how taxation works in the case of cryptogambling profits.
All of the confusion is partly due to the fact that there is still an unclear, gray area when it comes to how cryptocurrencies are perceived by the relevant income tax provisions in each state and in each individual case. The key things you need to understand to get a clearer picture of bitcoin gambling taxes are explained below.
Cryptos are treated as digital assets
In the US, one of the first things you need to know to better understand the gambling tax on bitcoin is that the cryptos are considered – and therefore treated – as assets and not as currencies. So, for tax purposes, crypto is considered much the same as stocks and bonds.
Cryptogambling is subject to both state and federal tax laws
Another important commitment is that both federal and state laws apply in the US when it comes to cryptocurrency gambling taxes – and subsequently bitcoin gambling taxes.
Winnings from cryptogambling are taxable events
Every time you win bitcoin from gambling, this automatically becomes a taxable event – it is an event that triggers your obligation to pay tax. The federal gambling winnings tax is now 24% on winnings. Here are a few more things you need to understand to identify when tax is withheld by the payer or when you need to keep track of your tax liability, but for now we won’t go into such details.
Gains in cryptocurrency are treated as capital gains and are therefore also taxable events
Not only are you taxed on crypto gambling winnings, but you are also taxed on capital gains related to any sale, purchase or use of cryptocurrencies that you have won from gambling.
Let’s say you have won BTC from gambling and you want to sell this BTC later. If you generate income from that sale (for example, sell the won $1000 of BTC for $1300), then these are treated as capital gains and the entire transaction is a taxable event, just like gambling winnings are. In fact, the IRS takes a cut from the profit you just made (the capital gain), which is usually 15%. However, this percentage may vary depending on family composition and gross income.
Bitcoin gambling losses are deductible
The IRS will certainly tax your gambling winnings, but – quite obviously – it will not tax your gambling losses. In fact, gambling losses in bitcoin can be deducted from the amount of your winnings from gambling within the same tax period. More simply, if you win $1,000 from gambling and later lose $1,500 again gambling, then you can only deduct the $1,000 lost. Gambling losses offset gambling gains, not capital gains.
All gambling winnings (and losses) must be reported on the tax return
Gambling winnings should go on your tax return, whether you are a recreational or a professional gambler. For non-professional players, winnings are reported as gambling income and losses as itemized deductions. For professional players, they are reported as business income and losses.
Now it has become far more clear how cryptogambling taxes work for most states in the US where online gambling is legal. A key commitment from this short guide is that bitcoin specifically and cryptocurrencies in general are viewed and treated as assets, and this pretty much determines all tax policies and laws.
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