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Cryptogambling is growing at a very fast pace all over the world, including the US, 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 at CryptogamblingTV, people have plenty of options and alternatives to choose from when they want to gamble.
But bitcoin gambling is relatively new and the ways in which it functions and is treated, when gamgbling winnings are generated, is still unclear and confusing to many of you. Several gamblers are wondering whether their winnings are taxable, how they might 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.
The whole confusion is partly because there is still a blurred, gray area regarding how cryptocurrencies are perceived by the relevant income tax regulations in each state and in each case. The most important things you need to understand for getting a more clear picture on sports bitcoin gambling taxes are explained below.
Cryptos are treated as digital assets
In the US, one of the first things you need to know in order to be able to better understand the bitcoin gambling taxes is that the cryptos are considered – and therefore treated – as assets and not as currencies. So, for tax reasons, cryptos are regarded pretty much the same way that stocks and bonds are regarded.
Cryptogambling is subject to both state and federal tax laws
A second important undertaking is that in the US both federal and state laws apply, when it comes to cryptocurrency gambling taxes – and subsequently bitcoin gambling taxes.
Cryptogambling winnings are taxable events
Everytime you win bitcoin from gambling, then this automatically becomes a taxable event – that is an event that triggers your obligation to pay taxes. The Federal gambling winning tax is now 24% on winnings. Here there are some more things you need to understand for identifying when the tax is withheld by the payer or when you have to keep track of your tax liability, but for the time being we don’t get into such details.
Cryptocurrency winnings are treated as capital gains and therefore they are also taxable events
It is not only that you are taxed for cryptogambling winnings, but you are taxed also for the capital gains associated with any sale, buy 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 on. If you generate earnings from that sale (sell for instance the won $1000 of BTC for $1300), then these are treated as capital gain and the entire transaction is a taxable event, just as the gambling winnings are. In fact, the IRS takes a cut from the profit that you have just made (the capital gain), which is typically 15%. This percentage, however, can range depending on the family composition and the gross income.
Bitcoin gambling losses can be deducted
The IRS will certainly tax your gambling winnings, but -rather evidently- it will not tax your gambling losses. In fact, bitcoin gambling losses can be deducted to the amount of your winnings from gamblings within the same taxed period. More simply, if you win $1000 from gambling and later on lose $1500 again in gambling, then you can deduct only the $1000 lost. Gambling losses are offsetting gambling winnings, not capital gains.
All gambling winnings (and losses) need to be reported on the tax return
Gambling winnings should go into your tax return, whether a recreational or a professional gambler. For non-professional gamblers, winnings are reported as gambling income and losses as itemized deductions. For professional gamblers, 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 undertaking from this brief guide is that bitcoin specifically and cryptocurrencies in general, are regarded and treated as assets and this pretty much determines the entire tax policies and laws.
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