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All You Need to Know About Gambling Income Tax

Individuals who plan to venture into gambling should know the pros and cons of the industry. Gambling has crossed over from traditional modes of playing to cryptocurrency-based games like the Bitcoin Blackjack. In this write-up, we will discuss the various aspects of the gambling income tax that you should understand.

As shown by the 2016 Gallop report, approximately 2/3 of United States residents engage in a form of gambling. According to Wikipedia:

“Under section 165 (d) of the Internal Revenue Code, “losses from wagering transactions” may be deducted to the extent of games from gambling activities.”

Gambling winnings are money generated from betting games or on some wager events. You must keep records of winnings for Individual Federal tax returns.

How Do Gambling Winnings Work?

Winnings made from betting can be from Bitcoin blackjack, sweepstakes, horse races, bingo, lotteries, raffles, Keno, or betting pools. And they tax this income at a flat rate of 24% for all your winnings.

The federal government has structured rules that guide the running of the gambling business through the Internal Revenue Service.

As shown by IRS, earnings made from both cash and noncash gambling are classified as taxable income.

If you intend to take up gambling as a full-time profession, as a professional who makes a daily living, you would need to keep records of all your income and expenses you make from winnings; these include your online Bitcoin Blackjack gambling activities.

The government taxes a professional gambler according to the regular effective income tax rate. As a professional gambler, you are obligated to report all your earnings on your tax return.

This is essential because you may be required to present your gambling income and losses annually at the interview of your file return.

Luckily, taxes from gambling income are at a fixed rate.

They are not progressive, like regular income taxes. Gambling income at a 25% tax rate remains unchanging whether you win $600,000 at the slot machine or $1,000 at the poker table.

In regular instances, the gambling company deducts the tax income from your winnings up front before payment.

When an individual does not provide a tax identification number to a casino, the federal taxes will be withheld at 28 percent. When the earnings are higher than $5,000, withholding of taxes is done.

Cards
Photo by Clifford Photos from Pexels

Shared Gambling Winnings Between Two or More Parties

When gambling winnings are joined, they are required to fill out a PDF Form 5754, but when the paying casino has taken off the tax rate, they share the number of earnings made among the players. Then they document the reports on the gambling winnings on a W2G form.

Gambling losses will be reported just like the winnings. IRS allows you to take off your gambling losses while itemizing your gambling activities on the schedule A PDF form 104. It is advisable to report both winnings and losses distinctly instead of offering a net amount for both.

Gambling with Bitcoin Blackjack

Casino tables were the thing in old times, but now with the evolution into cryptocurrency, Bitcoin blackjack became popular in the online betting arena.

Today there is an increase in transactions made through blockchain gambling. Bitcoin blackjack allows gamblers to make bets and earn using BTC. It shares similar rules of engagement with the traditional Blackjack, but has more benefits.

There are many exciting Bitcoin blackjack games you can try. Some of these games include:

  • Pontoon:

This is a Bitcoin blackjack that is perfect for anyone passionate about playing cards.

  • Blackjack 5 Box:

This Bitcoin blackjack is a different version of the traditional casino Blackjack. It has similar rules of engagement but is more simplified.

  • Bonus Poker:

This is another game that is a popular form of Bitcoin blackjack gambling.

Requirements for Bitcoin Blackjack Gambling Records

As a gambler, you are required by the IRS to have an up-to-date report of all your earnings and losses made. This is done using the W2G form and form 5754.

Another requirement is that you keep every betting-related document such as credit records, statements from gambling companies, receipts, wagering tickets, substitutes, and canceled checks.

Keeping these documents is important because they stand as proof of your winnings and losses when your losses will be deducted from your taxes.

The below listed aspects should be preserved for every win or loss you make.

  • The date
  • The amount of earning
  • Losses made
  • Kind of gambling exercise
  • The name of the gambling establishment
  • Location and address of the establishment
  • Individuals present in the gambling exercise

And for the below-listed betting transactions, you should present the following records as evidence of your earnings or losses:

Bingo – The number of tickets you purchased should be given, the figure of games you played, the earnings made on wins, and other receipts the casino provides.

Lotteries – You should present a report of your payment slips, statement of winnings, losses, dates, tickets bought, and all unredeemed tickets from games.

Slot Machines – You are to provide records of your slot games. Details such as the time the game was played, and the date the earnings were made are essential.

Keno – While playing Keno, you should present copies of the casino’s cashing records and credit data. You are also required to give copies of the keno tickets that were authorized by the betting company, which you purchased on the day the game was played.

Table Games – While playing tables, you are to present the figure of the table you played. The company’s credit card data should also be provided.

This should show whether a credit card was issued in the pit or issued at the cashier’s cage.

Racing Events – You are to present a report of the payment slips, losses, earnings, winning statements, tickets bought, and dates.

Conclusively

As discussed in this concise write-up, every dollar you earn from gambling exercises, such as from online Bitcoin blackjack games, is considered taxable income. With this established, you should keep records and documents of all your gambling winnings and losses. This documentation will come in handy when you want to make annual deductions of the losses you made. Recordkeeping will help you properly manage your tax refund and what the IRS owes.

The post All You Need to Know About Gambling Income Tax appeared first on Home Business Magazine.

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