Winning the lottery or striking it big and rich at a casino can seem like a lot of fun and a pathway to an easy street. However, you do need to remember the old quote about ‘death and taxes’ where taxes are made certain.
Taxes are often deducted from big winnings in advance, and they also need to be taken into account as well. However, what if you make your big win in a crypto casino?
Cryptocurrency is still a little confusing, especially whenever it comes to taxes, and you aren’t out of the woods whenever you win your money at a crypto casino.
Here’s how taxes work and what you need to be aware of if you cash out at a casino that sells crypto.
Cryptocurrency Casinos are similar to other casinos, although instead of bringing in wads of cash, you are using crypto. Otherwise, the rules are the same: You put your bet down, you play the game, you win or lose, and you always need to keep an eye on the house. Once you have won, then the crypto gambling taxes come in.
There are three types of taxes that happen. You can be taxed on betting your crypto, winning crypto, and selling your crypto winnings for fiat currency. In the first two of these, there’s no clear guidance on how to tax crypto, but for winning crypto in the casino, you can get taxed differently based on where you live.
In Canada, Australia, and the UK, all of your winnings are tax free, provided you don’t solely make a living at the gambler’s table. However, if you gamble with crypto in the United States, then you need to subject your winnings to both Federal and State income tax.
The most complicated part of the taxation of cryptocurrency is whenever you sell your winnings for fiat currency.
On any capital gain, you are paying Capital Gains Tax, which is the difference in value between when you bought your cryptocurrency and when you sell it for profit.
Now, whenever you get crypto from gambling winnings, you really aren’t buying anything, so in some countries, you get hit with a lot of Capital Gains Tax.
Even if you find the best cryptocurrency gambling websites, such as the games you can find at CasinosCrypto, you still need to calculate your deductions due to the federal and state income tax, as the websites will not do it for you.
You instead need to report these gambling winnings as other income on your Schedule 1 Form 1040, and will need to report and pay crypto capital gains taxes on any increase in the value of the crypto whenever you trade your winnings for fiat currency.
If you don’t get into a hot streak while you are gambling and end up losing some money at the table, then you might wonder if you can write off your crypto gambling losses.
Well, you can deduct the losses you have gotten from your crypto gambling losses, but only up the number of your winnings. Plus they need to exceed the standard deduction and other allowable deductions as well.
So if you win some bitcoin (say $4,000), but also lose $8,000 in bitcoin during the same period, then you will only be able to deduct $4,000 if all other conditions are met.
Especially if you live in the United States, the policies around cryptocurrency can be very confusing, and no one wants to win a massive amount of cryptocurrency when gambling only to find the large total neutered by taxes.
The best way to handle your crypto casino winnings being taxed is to educate yourself on what is going to happen whenever you try to trade your winnings in for fiat currency.
Then you won’t be surprised and can focus on spending and enjoying the winnings that you do have, even if some of them have gone to the government. Plus, you still get the high of winning at the end of the day, so that’s something!