The world of crypto gambling is truly remarkable. There are no boundaries, no silly rules and nobody telling you what you can and cannot do.
But, this creates a quandary in the tax department. How much tax do you need to pay on your winnings when you’re gambling in crypto? Can you deduct your losses from your tax bill?
Crypto related tax information can be a little hard to squeeze out of the tax man in most countries, so I’ve put in the ground work to get you the answers that you need to help you sleep at night.
Will my gambling winnings be taxed?
Crypto gambling is taxed in exactly the same way as any other form of gambling. So, if you don’t have to pay taxes on your gambling winnings, the same rule applies to your crypto gambling winnings. Most countries don’t tax your gambling winnings, including for example:
- 🇦🇺 Australia
- 🇦🇹 Austria
- 🇧🇪 Belgium
- 🇧🇬 Bulgaria
- 🇨🇦 Canada
- 🇩🇰 Denmark
- 🇫🇷 France
- 🇩🇪 Germany
- 🇮🇪 Ireland
- 🇮🇹 Italy
- 🇲🇹 Malta
- 🇸🇪 Sweden
- 🇬🇧 The United Kingdom
There are a few caveats to this rule, such as if you’re gambling as part of a business. On the other hand, here are some example of countries that do tax gambling winning:
- 🇨🇳 China
- 🇪🇹 Ethiopia
- 🇮🇳 India
- 🇲🇽 Mexico
- 🇪🇸 Spain
- 🇺🇸 United States of America
- 🇿🇼 Zimbabwe
Is crypto gambling taxed in the United States?
In the USA you are supposed to pay a flat 25% tax on your gambling winnings. If you don’t hand over your social security number to the sportsbook or casino, they are supposed to take up to 30% of your winnings to cover the tax bill.
If you’re playing at an offshore crypto sportsbook or casino, and you wish to comply with the tax system, then you’ll have to keep the money aside yourself and pay it come tax time. There is a good chance that the tax man won’t find out about or question your winnings, but if you do get caught not paying the correct taxes, the punishment can be as severe as jail time.
The USA, like most countries that tax your gambling winnings, also allow you to claim you gambling losses as a tax deduction, up to the amount you have won.
Are you running a gambling business?
If you are gambling professionally, or you run a gambling related business, then your winnings are taxable in a number of countries, including the USA and Australia.
Let’s say you’re a professional poker player like Daniel Negreanu or Phil Hellmuth. You are gambling professionally so you winnings are taxable.
Or let’s say you have a race horse training business and you also like to bet on the horses. All your horse race betting is taxable because it’s related to your business.
There are 9 states in the US that don’t charge income tax, meaning that if you live in one of these states it’s better to gamble as part of a business rather than personally. These are the 9 states that don’t charge income tax:
- New Hampshire
- South Dakota
It’s also worth noting that if you’re running a gambling related business in Australia, you can deduct all of your losses from your tax bill, even if your losses exceed your winnings.
Capital gains on crypto
Cryptocurrency tax rules are fairly new, meaning that most people have no clue that they’re even supposed to pay taxes on their crypto activity. Some jurisdictions say that every time you transact in a cryptocurrency it’s a taxable event.
On the other end of the scale, there are countries that don’t tax your crypto activity. For the most part, if you simply bought cryptocurrency to deposit and place bets with, you treat the winnings in the same way as you would winning in a government currency.
Let’s say you then hang on to those winnings and the cryptocurrency in question goes up in value. You might have to pay capital gains taxes if you spend the winnings or convert the winnings back to a government currency.
Take note of transactions
To cover your back as best as you can, you could make a note of how much crypto you used, won or lost from your bet, the date and the value of the cryptocurrency at the time.
Fortunately, most crypto sportsbooks and casinos will have a bet, deposit and withdrawal history. In some cases you can even download the data and import it to your book keeping application.
Any gains that you make in the form of appreciation in value on the bitcoin that you just won from your bet will be taxable from the price each bitcoin was worth when your bet was settled.
Calculating capital gains on winnings
You only pay capital gains tax on the rise in bitcoin’s value from the time you received it. This value is called your cost basis. Say you acquired 50 bitcoin at $1 each, then bet it and won another 50 bitcoin when the price was $10 each. Half your 100 bitcoins have a cost base of $1, the other half have a cost base of $10.
Let’s say you’re in the USA and bitcoin has gone up to $20 by the time you sell it. The tax breakdown will look like this:
20% capital gains tax on 50 bitcoins that rose in value from $1 to $20 = $190.
20% capital gains tax on 50 bitcoins that rose in value from $10 to $20 = $100.
Total capital gains tax payable = $290.
The same goes for any capital losses you wish to report.
How much capital gains tax will I pay?
In most jurisdictions, the rising value of your cryptocurrency assets is taxed as capital gains, just as if you made the money from trading stocks or property.
This table shows how much capital gains tax you’d have to pay in a range of countries should you make money simply by holding crypto. Note that some countries have deductions available to help cut that bill down.
|🇦🇺 Australia||37% + 45c for every $1 over $180,001||50% reduction for holding 12 months +|
|🇨🇦 Canada||50%||Capital losses|
|🇫🇷 France||30%||Capital losses|
|🇩🇪 Germany||45%||100% reduction for holding 12 months +|
|🇮🇪 Ireland||33%||Capital losses|
|🇲🇹 Malta||35%||Many ways to pay no crypto tax|
|🇸🇪 Sweden||30%||Capital losses|
|🇬🇧 UK||20%||Capital losses|
|🇺🇸 USA||20%||Capital losses|
There are lots of caveats to how much capital gains tax you have to pay. For example, in Australia if you have less than $10,000 in cryptocurrency and you use it for personal uses, such as purchasing food, clothes, other items etc, then you don’t need to pay any capital gains taxes on it.
As you can see, when it comes to gambling with crypto the rules are pretty straight forward. Gambling tax laws mean that in most countries you don’t need to pay any taxes on your winnings, but if you’re winning in crypto, you could have capital gains to pay.
My best advice is that if you’re still unsure as to whether you need to pay taxes, declare any crypto gambling related income or you simply have any crypto gambling tax related questions you should reach out to a qualified accountant. It could save you a lot of money and trouble down the line.