It’s every gambler’s dream to hit a huge payout and to bring home a pile of cash. But how much of that cash can you legally keep, and how much goes away in taxes?
Well, the rules differ from country to country.
For this article, we’ll focus on the ins and outs of gambling taxes for UK players, and then for US players.
First, here’s a quick summary of what we’re going to talk about:
- UK gamblers playing at UK casinos do not have to declare or pay taxes on their winnings
- US casinos will ask for tax information & withdraw taxes if a player wins $600+ in one go
- US gamblers must declare all winnings during tax month under “Misc. Income”
As we’ll explain in this article, the specific details may differ from casino to casino. Let’s take a closer look at how it all works.
Taxes for UK Gamblers: Land-based & Online Casinos
We’ll keep it simple for the case of UK casinos and gamblers, because there’s really not much to say.
You do not have to pay taxes on any of your winnings.
And this is true whether you’re a professional gambler or a recreational one. In the UK, gambling winnings aren't viewed as income, so don't have to be declared as such.
So if you depend on gambling winnings as a form of income, or if you’ve just hit a one-off jackpot, you don’t have to worry about calculating percentages to give away.
Cashing Out at Casinos
Of course, when it comes to cashing out, you’ll be restricted by the casino’s withdrawal limits. You can still cash out as much as you like – simply, you'll have to take it out in multiple installments if you have to.
As it’s the casinos & bookmakers who get hit by taxes, you may find that UK casinos have slightly smaller withdrawal limits than US ones.
But we think it’s worth the hassle of multiple withdrawals and eventually paying multiple withdrawal fees to the casino, if you get to keep it all afterward.
Taxes For US Gamblers: Land-based Casinos
Unfortunately for US gamblers, it’s pretty much the opposite in their country. In the states where gambling is legal, gambling winnings are indeed treated as a form of income and are fully taxable.
If you’re a US resident, taxable gambling income includes:
- Horse races
- Casino winnings (slots & card/table games)
Like in many countries, there is a threshold beyond which your income becomes taxable. A few years ago the tax threshold for gambling winnings was $1,200 – now it’s gone down to $600.
The question therefore changes to: “When do I have to file my own taxes, and when does the casino do it for me?”
Triggering a Tax Form
Imagine that you’re in a land-based casino, playing with a friend. You get lucky and win $600 with just one spin or hand, while your friend gets $600 of overall winnings.
In your case, during the casino’s cashing-out process, you’ll be asked to fill out a W-2G (or a “1042-S” for non-US residents). The casino will then withhold the tax themselves and you’ll go home with your net winnings.
In your friend’s case, he’ll be able to go home with his gross $600 winnings. He’ll have to file taxes on that income himself.
As you can see, there are rules for triggering a tax form at a casino. They are as follows:
- You can cash out $600 of overall winnings without paying taxes
- You must pay taxes straight away if you win $600+ on one spin or hand.
In any case, you’ll have to pay taxes on those winnings. But the difference here is that you’ll be able to cash out $600 without the casino removing the tax percentage for you.
Paying Taxes When Cashing Out
Like we mentioned, when you get your money paid out to you at the land-based casino, the casino must issue you a W-2G.
If you got lucky and cashed out your overall winnings without getting taxed, don’t get your hopes up. You’re still going to have to report that income.
You’ll do this by declaring your winnings on your 1040 form as “Other Income”. This includes all winnings that didn’t require reporting on the W-2G.
Paying Taxes as Non-US Residents
As seen on the IRS official website:
The US has a tax treaty with UK, so UK residents aren’t subject to US income tax on gambling winnings.
This however doesn’t mean that you’re exempt from any taxes. At some casinos, you’ll find that you’ll simply have to pay a lower percentage.
In certain cases, the tax amount will still be withheld from your winnings. In order to get it released to you, make sure to arm yourself with your UK passport as well as an ITIN.
Taxes For US Gamblers: Online Casinos
Now, you might be thinking that you can get away with not paying taxes on money you’ve won online. You might try to stick it in an anonymous Bitcoin wallet and hope for the best.
But the IRS can very easily trace online winnings. In order to be operating legally, your online casino must conform to regulations.
This means that if the IRS comes knocking at their door, they’ll be contractually obliged to offer up your records.
So, the same rule applies. When do you have to file your own taxes, and when does the online casino do it for you?
Triggering a Tax Form
For online cash games, players are often given their full gross payout. That means they then have to file their own taxes. It’s during tournaments that casinos may withhold the percentage owed to the government.
Sometimes, online casinos will keep all winnings and players will get an email requesting them to give tax information. This happens when you:
- Win $600+ in a freeroll tournament
- Win $5,000+ in a regular tournament
The site will only release winnings once they receive information. You’ll sometimes get the choice of letting the site keep the tax percentage, or getting all the winnings and having to file your taxes yourself.
Declaring Gambling Income
When it comes to declaring your own winnings and filing your own taxes, you may have to declare it differently according to your situation.
- Professional gamblers: pay income & self-employment taxes on their declared “revenue”
- Recreational players: report winnings as “Misc. Income”
Cashing Out Casino Winnings: How it Happens
Now that that’s all out of the way, you may be wondering how the cash-out process actually works, and in what order things are done.
Let’s take a closer look at what you can expect. This holds true for both US and UK casinos. First we’ll look at how you cash out from a land-based casino, and then how you cash out from an online one.
Cashing Out From a Land-Based Casino
When you win a jackpot, you obviously won’t be getting thousands of pounds’ worth of notes chucked right into your lap.
High amounts of money call for heightened security.
There are several ways to cash out your winnings. It all depends on the casino you’re playing at, and the number of winnings you’ve just won.
Cashing Out Small Amounts
Winnings from slot machines: you’ll get a cash-out voucher from a TITO (ticket in, ticket out) machine. These can be redeemed from the casino’s reception, or from an automated kiosk.
Winnings from table & card games: you’ll take the chips you won to the casino’s reception, where they’ll be exchanged for cash.
Cashing Out Large Amounts
If you’ve hit a particularly big jackpot, you will be directed to a private room with guards for extra security.
In this room, a cashable voucher will be made for you to justify that you won the money. Then your money will be either hand paid in front of you, or put through a money counter.
Usually you can choose to get it in cash, or as a cheque. Sometimes cheques incur a delay, where you have to wait a few business days before you receive the cheque in the mail.
In some cases, the clerk will count out your bills in front of you so you can be sure that you get the full amount you won. They’ll often get guards to escort you to your car.
Cashing Out From an Online Casino
This is pretty straightforward: you’re the one who controls when you withdraw money from your online casino account, how much you withdraw, and where you withdraw it to.
According to the payment method you’ve chosen, the cash-out process may take anywhere between a few hours to a few weeks.
The times are usually as follows:
- E-wallets: 0-24
- Credit/debit cards: 2-4 days
- Bank transfers: 1-3 days
- Cheques: 2+ weeks (rarely offered)
To cash out, simply go into your user profile and navigate to the “Withdraw” function. You’ll be prompted to enter an amount, and a payment method to withdraw it.
Once you hit withdraw, you’ll fill out your banking tool’s payment verification process, and that’s it. Bear in mind that you can only withdraw from your regular casino account – not your bonus casino account.