The surest things in life…
… are death and taxes, so the saying goes. Whoever coined that phrase should probably add in “house edge” and variance. We gamblers certainly will have come to know by now!
Bitcoin and cryptocurrencies in general are becoming more and more accepted as payment or assets of value. And as they slowly gain legal recognition by states and government, the matter of tax comes into play.
Because of the extremely wide grey area between the black and white of legality when it comes to Bitcoin gambling, on top of the varying degrees of legislation there is between individual jurisdictions, there is no definitive answer when it comes to taxation on this issue.
However, there are some aspects for you to consider, especially if you wager significant amounts of Bitcoins online.
Do I have to pay taxes when I gamble with Bitcoin?
There’s the moral and ethical view on tax, regardless of your political leanings. Your country’s sole means of revenue is likely to be from tax and paying fair taxes isn’t just an obligation. It’s your social responsibility. How else would you enjoy the Internet infrastructure that lets you gamble online? The economy that allows you to afford Bitcoin? The education that ensured you understood how to use Bitcoin? Being able to even read this puts you in the top 10 percentile of the world’s population, and tax revenue is a huge reason for this.
But seriously, what are the tax expectations on me for Bitcoin gambling?
Likely, the most important factor here would be the tax laws of your country with regards to gambling. While some jurisdictions place an importance on your actual location when gambling as well as the locations of the casino servers, without expert advice, you’re best to assume you follow the regulations of your country of citizenship.
If you’re gambling under UK or Australia jurisdictions, for example, you’ll be happy to know that your winnings aren’t taxable. These countries don’t consider winnings as income nor a result of employment but rather a matter of good luck! But if you’re using US jurisdictions, then be aware that your winnings are considered capital gains and you have to report it for tax purposes.
But wait! There might be more to this. Bitcoin gambling winnings should, naturally, come to you as Bitcoins. There are some indications that when you convert your Bitcoins into say, Pounds Sterling, then you still have to pay VAT (value-added tax) on your fiat in the UK. Because Bitcoin is almost viewed as entirely different from national currencies, you should check what implications exchanging your Bitcoins for cash might have.
Tax should be on winnings
Whatever you end up doing, you should at least remember that tax should only be levied on your nett winnings. The US taxman (the IRS), for example, does allow you to report gambling losses as well as winnings. So even if you win a lot, but on the sum end up with a nett loss, you don’t owe any taxes. What’s more, gambling losses (as well as donations if you like tipping!) are usually tax-deductible.
Who says there isn’t a silver lining to losing or giving away freebies at a Bitcoin casino, right?
What do the Bitcoin casinos say?
As it turns out, not much. We looked over the Terms and Conditions of several sites and none have clear indications on what kind of tax exposure players might have.
Here’s a sample from an unregulated Bitcoin casino:
“The player is solely responsible for any applicable taxes that may be applied to any cryptocurrency the player has won through his/her usage of the services provided.”
And here’s one from a casino regulated in the US state of Delaware, which also states clearly that they won’t help you with tax queries:
“You are solely responsible for any applicable taxes on any prizes and/or winnings that you collect from the Website. The Casino does not provide advice to Account Holders regarding tax and/or legal matters.”
And here’s one from a casino regulated by the UK Gambling Commission:
“You agree it is your responsibility to account for any tax or duty imposed on you as a result of any of your betting transactions. You are solely responsible for recording, reporting, paying and accounting to any relevant governmental or taxation authority for any tax or other levy that may be payable on any winnings.”
In summary, you’re on your own when it comes to Bitcoin gambling taxes!
You’re unlikely to attract any attention for the time being from your very own taxman if you’re gambling with Bitcoin. But as the world catches up to Bitcoin, you can be sure that the spotlight will eventually turn on you.
Learn as much as you can and consult your tax lawyer or government tax authorities. There’s no such thing as being too careful – always cover your ass today so it doesn’t get bitten tomorrow.