13 May 2022 · 4 min read

How Tax Bitcoin Received From Gambling

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First of all, before we get into the details of paying taxes, you have to check if you are allowed to gamble with cryptocurrency. It's important because maybe bitcoin casino is banned in your country, and in this case, you don't have to think about tax anymore. If such an option is available to you then you should go to taxes. Generally, the charged amount depends on what type of assets you have and how much tax they require if you trade them for fiat currencies.

An interesting example would be the United States since its laws don't have clear demarcations. Some states have specific laws that prohibit online gambling, but online poker is allowed. So you can play there and usually special in though states bitcoin casino tax is absent.

Bitcoin casino and gambling taxes in different countries

The tax office in most countries hasn't provided yet any guidance regarding crypto casino winnings. However, there are extensive guidelines regarding crypto taxation and gambling taxes. The type of tax you have to pay will depend on your income. To understand crypto casino taxes, it is important to separate general types of income.

  • Revenue due to price difference;
  • Income from bets;
  • Income from winnings in bitcoin casino.

So far there are no separately designated rates specifically for cryptocurrency. They can be considered as bitcoin casino income tax or Capital Gains Tax. In many ways, this situation arose due to the fact that bitcoin is almost impossible to trace. And the majority, use this currency without paying taxes, and some even use it on purpose to not pay them.

However, there is extensive guidance regarding gambling winnings and their size depends on where you live. For example:

  • Canada: Bitcoin tax free gambling;
  • Australia: Bitcoin tax free gambling;
  • UK: Bitcoin tax free gambling;
  • US: Gambling winnings are subject to both Federal and State Income Tax.

As you can see, for US citizens, crypto casino isn't the best investment idea but for others, it's vice versa. But suppose the situation is that after winning you want to get rid of bitcoin. So what happens if you decide to sell your Bitcoins for fiat currencies? As already mention, Capital Gains Tax will be charged on any capital gains when you sell your bitcoin casino winnings. This is the difference between the value of your asset when it was acquired and when it was sold.

How to calculate bitcoin casino gambling taxes

This is complicated because of the determination of buy cost. The basis "price" of your crypto is the amount that you have spent to buy it. Your entire crypto winnings could potentially be subject to Capital Gains Tax in countries such as Canada, which use an adjusted cost base method. But you can argue that you have a zero-cost base (or negligible cost basis) and in countries like Australia and the US, where there is more control over the cost basis method, you might be able to change buy cost to avoid Capital Gains Tax. Of course, we don't recommend acting in a such way, because this is tax fraud, and let's take a better look at an example of how it should actually work.

Bitcoin casino taxes - calculation example

Say you deposit to bitcoin casino 1 bitcoin, which has a basis of USD 3500. You decide to take part in a poker tournament with a 1 Bitcoin buy-in. Suppose you win and now you have 5 Bitcoins. Your buy-in amount for the event is your basis in the original bitcoin, or USD 500. At this time, the price of bitcoin rose and now the price is USD 42,000.

Your gross winnings for the event would be the market value of the 4 bitcoins, or USD 140,000. Also, you'll profit from the increase in the price of bitcoin, it's sum will be USD 28,000. This event would result in a taxable gain of USD 25,200 and should be reported as such at the end of the year.

Conclusions

As you can see, the taxation of bitcoin casino games is quite simple, this is due to the very nature of bitcoin. However, you'll have to pay taxes on income, both on the increase in the price of the cryptocurrency and on winnings.

The last piece of advice will be that If you are unsure whether or not you must pay taxes, declare crypto gambling-related income, or have any questions about crypto gambling tax, you should consult a qualified accountant. This could save you time and money.

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