As every gambler knows, there are different rules and regulations for each country. The same goes for laws relating to betting tax. Here we will explain the tax placed on betting activities in both the UK and the US. Through reading this guide, you will discover how (and if) betting tax will affect you, what the tax rates are, and other important factors. The biggest difference between the UK and US betting markets is their tax laws. The UK is much more lenient when it comes to their betting tax act, the gambling establishments are the ones that pay tax, not the bettor. Whereas, in the US, bettors are
Betting Tax Quick Facts
Every nation has its own tax laws
Gambling rules and regulations are different in each country
Bet winnings are not taxed in the UK
The US considers all betting profits as taxable income
Not all US states permit sports betting activities
Before Considering Betting Tax – Is Gambling/Betting Legal?
Since every country has its own views and laws relating to the status of gambling – the very first step to take when considering the hobby (or profession) is to find out everything you can about the legal status of the gambling industry in your country. Without legal channels, there are no bets and no betting tax so be sure to check before spending too much of your time conducting research.
Games of chance and the action of placing bets have been legal in the UK since the 19th century when the status was changed from illicit to a regulated activity. Interestingly enough, gambling was legal once before in Britain, up until the Gaming Act of 1845 that is. Besides amendments to the gambling acts, it looks like the UK is pretty stable when it comes to the legal status of sports betting.
Gambling may have once been considered taboo in America, however, through the legalisation of the activity it has been brought out of the shadows and into the light. When it comes to gambling in the US, it is not as straightforward as you may assume. The trouble is that, yes, there is no federal law when it comes to the prohibition of gambling, however, each state within America has its own laws. This means that not all states allow gambling. Sports betting, in particular, was only legalised in 2018. The various US states are in varying stages when it comes to sports betting. The states either allow it, are considering it, or have not taken any action when it comes to legalising the activity as yet. The states that allow citizens to place bets include Nevada, Mississippi, West Virginia, Pennsylvania, and other states where bets are partially legalised – meaning they have not greenlit the activity just yet.
How the Betting Tax Affects You
Is betting taxable? The answer to this question depends on the gambling and betting laws of your country. UK and US bettors, for instance, have different tax laws that mean different things when considering whether betting income is affected in the long run.
If you are residing in the UK, then you are not the one that needs to worry about the taxman. In Britain, betting providers are subject to a 15% betting tax on their gross profits. Besides this, there are other taxes relating to the running of the business. This act has led to more competitive odds that have opened up the market to a number of new players which has resulted in the industry’s explosion.
Even professional bettors have no need for concern, as long as the profits gained from betting is not your only source of income. If you have another income source, then like regular players, you are not liable to pay betting taxes. However, this also means that you cannot claim tax refunds on losses, in fact, you would additionally not be required to declare your winnings to the government.
Since the legalisation of sports betting in 2018, the IRS considers all winnings taxable which means that all US bettors should include betting transactions on their tax return. On the list of reportable gaming income, you will find horse racing, lottery winnings, game shows, all sportsbook winnings, and more.
How is betting taxed? The income derived from successful cashouts is subtracted by any losses and the net amount is added to any other income you have. This total is taxed as ordinary income. Overall, the amount of tax owed is dependent on how much you win, as well as, other taxable income earned.
Tips & Tricks When Handling US Betting Tax
Remember to report any profits
Keep a record of any profits earned
Track both wins and losses
Professional bettors must file as a business
Only play bets that are profitable despite the betting tax
Conclusion: Always mind betting tax
No one really wants to think about paying tax, however, it is an important step in any bettor’s money management strategy and profit calculations. Tax may not affect you in the moment, however, if you reside in the US, you are required to declare your winnings. This means that by keeping track of your profits and losses you will be able to gauge how much tax you will be liable to pay. Keep your chin up, the way to make a long-term profit is to measure your victories and know how much you are pocketing in the long run. For UK residents on the other hand, unless your only source of income comes from betting profits, you are exempt from having to pay betting tax.