When the slot machine locks up and, in most cases, you hear the music and see the flashing lights on top of the machine, it is an indication then that the lady luck has smiled upon you and you have clicked the all-elusive jackpot.
But one of the first questions every player asks is whether they have to pay taxes on casino winnings? Gambling tax regulations vary vastly from place to place. In some countries, it is 100% illegal. In countries where it is legal, there are rules and regulations. Sometimes casinos, gaming and betting establishments are legally obliged to pay tax on their profits. In some cases, the individual must pay tax on their winnings. Other times these taxes are very high, sometimes they are very low making these places a haven for gamblers and casino operators.
But what do gambling taxes look like around the world?
While the rules are different from country to country, in many cases you will only be taxed if gambling is your profession or your main source of income. This means if you gamble and you win, but you have a more substantial source of income and you do not rely on gambling to earn a living, you will not be taxed. In many countries like Ireland and Kenya for instance, the player is not taxed on their winnings. Instead, the bookies must pay a certain percentage of tax on the total bets or winnings they record. In 2017, Kenya upped their tax percentage rate to 35% with hopes of helping young people pursue career choices other than gambling. Meanwhile, Cambodia has lowered its tax rate drastically in a bid to encourage new businesses to invest in its gambling industry. So let us find out more about taxation on slot machine winnings in various countries around the globe.
Taxes on Slot Machine Winnings in the USA
In the USA, when a lucky player hits a jackpot, there is the option of receiving the winnings in cash or check. In case it is a large sum, it is usually paid by check. However, the IRS only obliges the casinos to report winnings that are larger than $1,200. Of course, all winners are obliged to show proper identification like a valid ID or passport. When the casino checks for your identification they also look at your age to make sure you are officially and legally old enough to play. As the minimum legal age for gambling varies from state to state, you should be sure to check it out before you decide to play.
Do I Have to Report All Winnings?
All gambling winnings received from slot machines are subject to federal taxes, and both cash and non-cash winnings (like a car or a vacation) are fully taxable. Apart from slot machines, the same applies to winnings from the lottery, bingo, keno, poker or other games of chance. So, if the amount won on a slot machine is higher than $1200, the casino is required to report it. In other words, all your gambling winnings have to be reported on your tax return as “other income” on Schedule 1 (Form 1040), line 8.
Slot Machine Winnings in W-2G Form
In case it happens to you while you snag that big win (which we hope and pray for), it is useful to know that casino or other payers must give you a W-2G Form, listing your name, address and Social Security number. So, if the winnings are reported through a W-2G Form, federal taxes will be withheld at a rate of 25%. If, however, you did not provide your Social Security number (or your TIN), in that case, the withholding will be 28%. Either way, a copy of your Form W-2G should be issued, showing the amount you won alongside the amount of tax withheld. One copy needs to go to the IRS, as well.
Aside from slot winnings, Form W-2G is issued to winners of the following types of gambling activities like:
- bingo (for players who win $1,200 or more),
- poker tournament players (for $5,000 win or more)
- keno (for at least $1,500 worth wins)
- a horse track (if the winnings are 300x your bet)
However, W2-G forms are not required for winnings from table games like blackjack, baccarat, and roulette, whatever the amount. You would still have to report your winnings to the IRS. It is just that you will not need to do it through the W-2G Form.
Deduction of Slot losses
You can deduct your slot losses (line 28 of Schedule A, Form 1040), but gambling losses are deductible only up to the number of your wins. For instance, if you won $200 on one bet, but you lost $400 on one or a few others, you can only deduct the first $200 of losses. Meaning if you did not win anything for a year, you will not be able to deduct any of your gambling losses. You have to keep a good track of your winnings and losses to prove them with appropriate documentation. To prove your losses, you need to keep good records and have suitable documents. So, whenever you lose, keep those losing tickets, cancelled checks and credit slips. Your documentation must include the amount you won or lost, date and time, type of wager, type of your gambling activity, name of each casino/address of each casino you visited and the location of their gambling business. You may as well list the people who were with you.
Do State and Local Taxes Apply Separately?
Yes, you are required to pay your state or local taxes on your gambling winnings. In case you travel to another state, and snag some huge winning combo there, that other state would want to tax your winnings too. But you will not be taxed twice, as the state where you reside needs to give you a tax credit for the taxes you pay to that other state.
Online Slot Taxes
Whether you usually spin the reels of your favourite casino games in land-based casinos in the US, overseas casinos, or online casinos, all income for the citizens of the US is taxable. As a US citizen, you are required to send Form W2G for all winnings from a slot machine (not reduced by the wager) that equals to or is more than $1,200.
Taxes on Slot Machine Winnings in the UK
As a resident of the United Kingdom, your gambling winnings will not be taxed. Unlike the USA mentioned above, you will be allowed to keep whatever it is that you have won and earned in Britain, even in case you are a poker pro. Then again, you will not be able to deduct any losses you might collect. Currently, slot machine winnings are not taxed in the United Kingdom. The same goes for any other casino game.
It does not matter if you win £5 or £5 million playing online slots, your winnings will be tax-free as long as you reside anywhere in the UK, be that in England, Wales, Northern Ireland or Scotland.
Taxation in Malta
The first Lotto Act in Malta dates back to 1922. Gambling is now regulated by the Lotteries and Gaming Authority who issue licenses to land-based and online casinos. Casinos pay a €46,000 licensing fee and an additional 15-40% of their gross turnover.
Taxes on Slot Machine Winnings in Canada
When it comes to gambling in Canada, you do not have to pay taxes as your winnings are tax-free. According to laws in Canada, gambling activities do not fall under the category of a constant source of income, therefore your winnings will not be taxed. Canadians who do not make a living on their winnings are not required by the law to pay taxes on their winnings. Canadians do not even pay taxes on their lottery winnings. The only exception here is professional gamblers who make a living from betting and are, therefore, obliged to pay taxes.
Taxes on Slot Machine Winnings in Australia
You will be happy to find out that your slot winnings in Australia will not be taxed and here are 3 core reasons for that:
- Gambling is not treated as a profession (it is treated as a hobby)
- The government does not see profits from gambling activities as income, but as a result of good luck.
- The Australian government taxes casino operators and lottery organisers instead.
Gambling tax in Australia does not apply to winnings if they were made via an online casino or a land-based casino.
Taxes on Casino Winnings in Austria
Players are not taxed on their winnings in Austria. The casino is responsible for paying tax regardless of whether they operate or via a physical establishment aka a land-based casino or an online casino. 35-80% of all steaks placed at any casino in Austria, must be paid by the casino operator.
Taxes on Slot Machine Winnings in New Zealand
In New Zealand however, slot machine winnings (and any other winnings from casino games) are considered taxable income, in case the player has little income from other resources. But, apart from professional gambling, it is very unusual for winnings to be taxed in New Zealand. Most often, gambling is considered recreational and not income, so players can enjoy their gameplay as they do not have to pay taxes on their winnings.
Taxes on Winnings in Belgium
Belgium does not enforce taxation on gambling winnings for either online or land-based casinos. Players are not taxed; rather companies must contribute a fee to the government each year in exchange for a license.
Taxes on Winnings in Bulgaria
Bulgaria does not charge tax on online winnings. Casino operators pay €17,500 for each license and location in which they operate their casino. Roulette and table games are taxed at a fixed amount.
Taxation in Finland
Despite Finland’s long gambling history, it has only one legal casino which was built in Helsinki in 1991. Casino operators in Finland must pay 8.25% on their net profits and all profits are donated to charity!
Different countries have different rules and regulations regarding taxation on slot machine winnings. Nevertheless, it should not discourage you from giving a try at this exciting casino game. Because you never know when the lady luck upon you and where. So keep trying and good luck!