There’s one old tale that says there is nothing that’s certain in life. Except for taxes. We don’t know who came up with this phrase, probably Einstein or someone smart, but he forgot very important things like variance, house edge or chance for the heck of it. Gamblers know how important these things are, but when it comes to taxes, they’re generally confused. As the Bitcoin and other virtual currencies are becoming increasingly accepted as banking methods for online casinos, it’s important to recognize the legal aspects of things.
One of the main gray areas of the online Bitcoin casino industry is the taxes, the legal aspects of Bitcoin gambling and the different legislation one has to consult and respect while playing an online game of chance. Regardless if with Bitcoin, Ethereum, US Dollars or Russian Rubles. This means, based on where you’re from, there is no simple, unique answer as to how Bitcoin gambling and taxes work. Still, some general aspects exist and are impetuous for how to solve the taxing issues for your Bitcoin gambling account.
Are Bitcoin gamblers tax payers?
Two main aspects are to be considered when talking about taxes. There’s the moral, and then there’s the ethical view on taxes, so the personal and the legal parts of the issue. A country works because it collects taxes from its residents. Paying taxes and being fair about them is a social responsibility and an obligation, for that matter.
If you’re living in a country with good internet, roads, great cities, clean rivers and so on, you are living in a country that surely imposes taxes on people. Which is normal, of course. There’s no other way for you to enjoy fast internet than paying taxes for the infrastructure behind it. What about the economy that helps you buy your Bitcoins, or the education you need in order to understand how the cryptocurrencies work? They’re also based on you paying taxes.
So the most important thing to remember is, paying taxes as a Bitcoin gambler has to follow the laws regarding gambling of your own country. That’s about it in short. Some places around the world value your location greatly for when you’re gambling, thus charging you for taxes based on where you are or based on where the casino you’re playing on is. Regardless of the situation, it is best to follow the laws of the location rigorously.
Let’s say that you’re gambling on a casino that’s regulated by the UK or Australia. If this is the case, you don’t have to pay any taxes should you win the next big pot. There’s no gambling tax in these two countries, so every casino operating under UK or Australian law is free to play. If you, on the other hand, are playing on a casino that’s in the US, everything that you win is a capital gain so you will have to report and pay taxes on your earnings.
One more aspect you need to keep in mind is that naturally Bitcoin earnings should get to you as Bitcoins, as it so happens with most Bitcoin-based casinos. The issue is, when converting your Bitcoins in British Pounds, for example, you will have to pay a value-added tax or VAT when you exchange your virtual money to the UK fiat currency. Bitcoin is a totally different currency than a fiat one, so exchanging them for normal money might come with all sorts of taxes and impediments.
Taxing just the winnings
The best part about taxes is, they are normally only asked for when you’re talking about winnings, not losses or deposited assets. The IRS, which is the US tax service, allows for reporting of both losses and winnings. This means if you’re balancing out winnings and losses and report a final balance of zero dollars at the end of the month, you don’t owe anybody any money. Even better, losses registered while gambling are tax-deductible, so you can actually erase them from your bank in a legal way. See, there’s always a positive aspect to every negative situation, even losing your Bitcoin at the virtual slots.
Bitcoin gambling is still such a novelty, you are never going to be making any fuss with your taxman for the foreseeable future. Still, the world starts to understand how important Bitcoin is, which means the spotlight will eventually fall on your head one day. The best thing to do in preparation for this day is to learn as much as you can about taxes, consult your lawyer or local tax authorities and have everything sorted. You can never be too careful when it comes to taxes. It is better to get cover today than get a hefty fine tomorrow.