While some may describe investing in crypto as a gamble, that’s not the focus of today’s blog post. Today, we’ll be looking at crypto gambling: how it works, what it involves, and how it may be taxable in your region.
Crypto gambling is exactly what it sounds like: combining the more traditional world of gambling with the use of crypto assets. As crypto gambling has grown in popularity, so has the number of ‘crypto casinos’. There are online platforms (termed ‘casinos’) that enable users to bet their crypto assets for a chance of winning.
Typically, these online crypto casinos consist of similar games as a normal casino: slots, poker, lotteries and more. In the traditional casino world where you would place a bet with fiat currency, you do the equivalent on these sites by provide funds via your crypto wallet.
What to be wary of with crypto gambling
It’s important to note that with the increase in crypto gambling’s popularity, there’s also been growth in the amount of fraudulent crypto gambling sites. Malicious sites like these attempt to steal assets from the user, whether by not letting you withdraw your winners, creating malignant smart contracts that drain funds, and more.
Always make sure to do your own research to ascertain whether or not a crypto gambling site is reputable before engaging with it.
How is crypto gambling taxed in Australia?
In Australia, there is limited guidance on the tax treatment of crypto gambling and any subsequent rewards. This article from November 2020 states that both depositing funds in the form of crypto assets into a crypto gambling site, and receiving rewards in the form of crypto assets from a crypto gambling site, will both constitute capital gains tax events. This means that if you’re an Australian taxpayer engaging in crypto gambling, you’ll need to track the value, cost basis, and any associated gain or loss, relating to those transactions. We recommend talking to a local accountant if you need clarity on how to treat any crypto gambling transactions.
How is crypto gambling taxed in the US?
In the US, the federal government does not have laws explicitly outlawing or legalizing gambling with Bitcoin or other cryptocurrencies. That said, gambling is heavily regulated at the state level with most states having laws that make gambling with crypto either illegal or heavily restricted. It’s important to research the legality of participating in crypto gambling based on where you reside.
If crypto gambling is permitted in your region in the US, then it’ll likely be taxed as ordinary income at a federal and state level upon receipt. This means it’ll need to be reported as “other income” on your Form 1040. On top of this, if you go on to dispose of any crypto assets earned via gambling, capital gains tax may also come into effect. We recommend talking to a local tax professional to get clarity on how to accurately record crypto gambling transactions in your region.
How is crypto gambling taxed in the UK?
Typically in the UK, gambling winnings are not taxable. However, there is the possibility that if you cash out any winnings from gambling activities (either traditional or crypto-native) in the form of crypto assets instead of fiat currency, this may change things. Any gambling winnings earned in the form of crypto assets will need to be tracked for tax purposes, as future disposal events will be relevant for capital gains tax. The HMRC states that ‘where a customer considers that their transactions involving cryptoassets amounted to gambling, please make a referral following the process at CRYPTO100500. We recommend working with a local tax professional to determine what processes to follow when engaging with crypto gambling.
Other regions
If we haven’t mentioned your region specifically in this blog article, we recommend talking to a local tax professional. They will be able to help you determine what the most appropriate treatment of your crypto gambling transactions are for tax purposes in your region.
How can Crypto Tax Calculator help
A key takeaway from this article is that regardless of the tax consequences of your crypto gambling activity, there is an almost certain chance that you will need to be able to record the details of any related transaction for future use. That’s where we come in! Our algorithm will help categorize buys, sells, and cost bases relating to your crypto gambling activity so that you won’t have to manually track these values. Any gains, losses, and relevant cost bases made in conjunction with your crypto gambling winnings would also be taken into account when generating your final tax reports for a specific financial year.
The information provided on this website is general in nature and is not tax, accounting or legal advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider the appropriateness of the information having regard to your own objectives, financial situation and needs and seek professional advice. Cryptotaxcalculator disclaims all and any guarantees, undertakings and warranties, expressed or implied, and is not liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or Consequential Loss or damage) arising out of, or in connection with, any use or reliance on the information or advice in this website. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied. The information in this website is no substitute for specialist advice.
FAQs
All gambling winnings trigger a TAXABLE EVENT regardless if you received a form W-2G or not. For example, if you receive a $100 worth digital currency as a gambling winnings, you will pay taxes on that amount as ordinary income.
How is crypto taxed simplified? ›
The IRS considers cryptocurrencies “property” rather than currencies. That means they're treated a lot like traditional investments, such as stocks, and can be taxed as either capital gains or as income. Bookmark our full crypto tax guide for a later deep dive.
How is getting paid in crypto taxed? ›
Getting paid in crypto is seen as the same as getting paid in fiat currency. It's viewed as ordinary income and it's subject to Income Tax. This means you'll be taxed at your normal Income Tax rate for your crypto earnings.
How to prove crypto losses? ›
Forms to claim your crypto losses
There are certain forms that you should use when reporting crypto losses on taxes: Form 8949 and 1040 Schedule D. Each sale of crypto during the tax year is reported on the 8949.
How to avoid paying taxes on gambling winnings? ›
Gambling winnings are fully taxable according to IRS regulations but gambling losses can be deductible up to the amount of your winnings if you choose to itemize deductions on your tax return. Be sure to maintain detailed records of your wins and losses to support your tax deduction claims.
What if I lost more than I won gambling? ›
You can report as much as you lost in 2023, but you cannot deduct more than you won. Remember, you can only do this if you're itemizing your deductions. If you're taking the standard deduction, you aren't eligible to deduct your gambling losses on your tax return, but you are still required to report all your winnings.
How to cash out crypto without paying taxes? ›
There is no way to legally avoid taxes when cashing out cryptocurrency. However, strategies like tax-loss harvesting can help you reduce your tax bill legally. Converting crypto to fiat currency is subject to capital gains tax. However, simply moving cryptocurrency from one wallet to another is considered non-taxable.
How does IRS track crypto gains? ›
The IRS tracks crypto transactions using blockchain analysis, exchange reporting, and data matching. These tools help ensure compliance with tax laws. Failure to accurately report crypto transactions can result in severe penalties. US taxpayers risk fines and legal consequences if they don't comply.
How to avoid capital gains tax on cryptocurrency? ›
How To Minimize Crypto Taxes
- Hold crypto long-term. If you hold a crypto investment for at least one year before selling, your gains qualify for the preferential long-term capital gains rate.
- Offset gains with losses. ...
- Time selling your crypto. ...
- Claim mining expenses. ...
- Consider retirement investments. ...
- Charitable giving.
Finding your cost basis
This refers to the original value of an asset for tax purposes. In order to calculate crypto capital gains and losses, we need a simple formula: proceeds - cost basis = capital gain or loss. Note that two additional variables may affect your cost basis: accounting method and transaction fees.
The total Capital Gains Tax you owe from trading crypto depends on how much you earn overall every year (i.e. your salary, or total self-employed income plus any other earnings). This number determines how much of your crypto profit is taxed at 10% or 20%. Our capital gains tax rates guide explains this in more detail.
What is the wash sale rule for crypto? ›
For US cryptocurrency users, repurchasing crypto assets immediately after selling them triggers a crypto wash sale. This rule prevents investors from claiming tax losses on assets they still own. To comply with the wash sale rule, investors should wait at least 30 days before repurchasing an asset they've sold.
Do you owe money if your crypto goes negative? ›
Despite the risks involved, shorting crypto has advantages, making it a high-risk, high-reward strategy. So, answering if a crypto goes negative, do you owe money? You may have to pay the buyer to sell if the crypto value goes negative when you sell off the bought cryptocurrency.
How much do you pay taxes on crypto before withdrawal? ›
The rate depends on how long you owned the crypto and your income. Short-term capital gains tax rates range from 10% to 37%. Long-term rates can be as low as 0% or as high as 20%. Selling crypto for a loss and moving wallets generally won't generate tax liability, but staking and crypto-crypto trading do.
Is it illegal to not report crypto losses? ›
A42. You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return.
How much taxes do you pay when you cash out crypto? ›
The rate depends on how long you owned the crypto and your income. Short-term capital gains tax rates range from 10% to 37%. Long-term rates can be as low as 0% or as high as 20%. Selling crypto for a loss and moving wallets generally won't generate tax liability, but staking and crypto-crypto trading do.
Are crypto rewards taxable income? ›
How are crypto rewards taxed? In most parts of the world - crypto is taxed in a similar way, including your crypto rewards. It'll either be subject to Capital Gains Tax or Income Tax. You'll pay Capital Gains Tax on any profit (capital gain) when you sell, trade, spend, or gift your crypto.
Do you have to report gambling winnings under $600? ›
If you win at a sportsbook or casino, they are legally obligated to report your winnings to the IRS and to you if you win up to a certain amount ($600 on sports, $1,200 on slots, and $5,000 on poker).
What is the Capital Gains Tax on gambling winnings? ›
The fair market value of non-cash prizes such as cars or holidays is also categorized as gambling income. In certain cases, gambling establishments may be required to withhold 24% of gains for federal income tax, reporting this on a W-2G form that is given to the winner and sent to the Internal Revenue Service (IRS).
