If you’ve enjoyed substantial winnings at a casino, you might have realized that your earnings are subject to tax obligations. High rollers, or ‘whales,’ often bet and sometimes win big, thus raising the question, “How do they pay their taxes on gambling income?”
The allure of winning big at high-stakes tables is undeniable, but understanding the tax implications of their wins – and losses – is essential for both the elite players and any curious onlookers. In this blog post, we take a deep dive into the tax regulations and obligations that high rollers face when settling their dues with the taxman.
Who are High rollers, and How do Casinos Pay Them Out
How much do high rollers bet? Put simply, it depends on who you ask. Management at the Cosmopolitan in Vegas won’t bat an eyelid at a few hundred dollars spent per hand, but such a player may be all the rage in a smaller casino with less affluent customers. You’d have to bet at least a few thousand dollars over extended periods to be considered a high roller. They are a vital segment of the casino industry, as their substantial bets can significantly impact a casino’s revenue. As a result, casinos frequently provide exclusive benefits, increased withdrawal thresholds, personal account managers, and various other incentives to keep them playing.
Aside from complimentary accommodation, casinos offer various other perks to cater to their high-stake bettor’s needs and retain patronage, such as a personal concierge, transportation arrangements, and fine dining.
Casinos have established protocols for paying out high rollers to cater to their unique needs and preferences. One common method is a combination of cash and casino chips. Once a whale decides to cash out their winnings, they might receive a portion in cash. However, the casino often offers a significant portion of the payout in casino chips for security and convenience. These chips can be used on more games or easily converted to cash. Some high rollers prefer to have their winnings wired directly to their bank accounts, especially if they are foreigners or tourists.
How Tax on Gambling Winnings is handled in North America
Gambling income is taxable in the US for “significant winnings.” Depending on the game you’re playing, the “substantial amount” may range from $600 for games of chance, such as slot machines, to $5000 for games requiring more skill, such as craps or blackjack. High rollers almost always hit these numbers in their wins and are thus subject to filling a W-2G form, alongside an instant 24% deduction from their winnings by the casino. The 24% is an estimate, and depending on their task bracket, they may still owe some money or get some of it refunded.
If it’s any consolation, gambling losses are also deductible — well, to some extent. Gamblers can write off their gross losses as long as they itemize their deductions, but they can only utilize these losses to offset up to the amount owed on their gross winnings. So, no, players cannot rack up tax credits for losing.
It is worth noting that individuals considered “professional gamblers” can deduct expenses related to their gambling activities. This includes travel costs for poker tournaments and hiring a poker coach. Other reasonable expenses like lodging, meals, wages, and tickets can also be written off as itemized deductions. It can be unclear who qualifies as a professional gambler, but typically, they possess a certain skill level in their records and demonstrate an ability to earn a living through gambling.
Generally, Canadians are not required to pay taxes on their gambling winnings. However, any interest earned on these winnings must be reported and may be subject to taxation. This includes interest earned on savings accounts or dividends from stocks purchased with gambling winnings. Professional gamblers are, however, still subject to tax on the provincial and federal levels. They may also enjoy tax deductions from losses.
How Tax on Gambling winnings is handled in Australia and NZ
In Australia, the average winner is unaffected by gambling taxes because they are applied to corporations rather than individuals. This is quite different from many other countries worldwide, such as the US, where the gambling prize winner is responsible for paying the taxes. The reason for the differing approach to gambling taxation is that the Australian government considers gambling income as luck, unlike many countries like the United States that view it as income. Australia’s view has a straightforward justification. Most of the time, when people gamble, they lose. And it isn’t usually a sizeable sum when they win.
Also, if you’re playing on sites like Spinfever online casino for real money, you’re not regarded as a professional gambler, which is another factor preventing gambling earnings from being taxed as income. Gambling is regarded as a hobby, a pastime, and a source of amusement.
It’s a similar situation in New Zealand. Gamblers are not legally required to pay taxes on their gambling proceeds whether they play online or in land-based casinos. One exemption would be professional players, like those who regularly participate in poker tournaments. For them, gambling is regarded as their source of livelihood in a game of skill such as poker.
How Tax on gambling winnings is handled in Europe
The exact percentage differs for certain factors, but most European countries tax gambling winnings based on location and the nature of the game.
For instance, Germany taxes a flat 5.3% on a player’s stake, while gamblers in countries like the United Kingdom and Ireland are not required to pay taxes on their winnings, even if you are a professional gambler.
For Poland, it’s 10% on drawings and telebingo, 15% on cash lotteries, 25% on tournament poker and real money bingo, and 50% on cylinder, dice, card games, and slot machines. The good news is that players are exempt from income tax up to 2280 PLN.
In the Netherlands, 10% is taxed on horse racing, with 29% on most other casino games.
Croatia tax levies are subject to the amount won: 10% for winnings up to HRK 10,000 ($1,439), 15% for HRK 10,000 – 30,000 ($4,319), 25% for HRK 30,000 – HRK 500,00, and 30% for amounts exceeding that.
Casinos and sports betting winning in Spain are taxed in tiers starting from 19% on €12,450, 24% for up to 20,200, 30% for up to €35,200, 37% for up to €60,000, and 45% for exceeding amounts. Lottery winnings over €2,500 are subject to a flat 20% tax.
France requires players to declare all gambling winnings and levies a 13.7% tax for any gambling winning over €1,500.
Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, Germany, Hungary, Italy, Luxembourg, Malta, Romania, and Sweden are all gambling tax-free countries and won’t take a single Euro of earnings, even for a high roller with big-figure winnings. However, accrued losses cannot be written off or applied toward tax credit.
Are there tax differences between online and land-based casinos?
The same rules apply for online casinos as they do for land-based ones. Just like with their brick-and-mortar counterparts, US-licensed online casinos must report their winnings to the IRS through form W-2G, while offshore casinos outside the jurisdiction of the US do not have to report. Nonetheless, players are still legally required to declare their winnings — whether it’s reported or not. Similarly, local tax laws apply to players residing in other countries, regardless of whether they play on a foreign casino website.
There has been a lot of debate around winnings that haven’t been cashed out from foreign online casinos and whether it’s taxable income. As regulations for online casinos are not yet firmly established, it’s best to play it safe, especially for high rollers facing more scrutiny and a higher chance of being audited. Ultimately, an argument could be made both ways, and a case like this will likely end up in court.
How About State Taxes?
In the US, federal income taxes aren’t the only betting tax that players owe on gambling income. Most states have a separate income tax, with the exception of Florida, Alaska, Nevada, Wyoming, South Dakota, Washington, and Texas. Also, unlike federal income tax – where gambling loss can be deducted – some states don’t allow deductions from losses. Consequently, whales may find it particularly inconvenient in states like Connecticut, Massachusetts, and Ohio, which don’t allow writing off gambling losses.