What taxes do I have to pay when I play casinos and lotteries?
Lotteries, casinos and other types of gambling are entertaining types of services, in which one can earn a decent sum of money. For tax system it means that a person is getting revenues from casinos or organizations, which hold the lottery, and is has to be taxed according to the legislation of many countries. In case a visitor of some online casino loses his or her money there, no questions will be asked though.
The question is individual for different countries, but usually government is not bothered with the issue of the source of your income when it’s about revenues through gambling. In a number of countries online casinos work half-legally, but the taxes on all sorts of income still have to be paid in a regular mode.
Taxes for revenues in lotteries and casinos in US and other countries
USA can brag with the highest rates of wins in lottery and other risky games. This is because this country has a great number of different lotteries and casinos, including private and federal ones. Carrying lotteries and casino activities are generally not prosecuted by the law. However, the United States strictly abide the rules and honesty of gambling procedures, guaranteeing equal chance to win for everyone. Along with that, one should remember that US have one of the strangest tax systems in the world; almost all sorts of revenues are taxed in this or that way, and not paying it may cause a lot of problems.
Tax rates vary from state to state. The biggest tax paid from the lottery win is 25% of the revenue; however, each state is free to change the legislation in this or that way, thus, in most cases you have to pay 10-15% more to the state treasury. Luckily, the maximal total tax will not exceed 40% of the revenue.
The states with the most loyal legislation are California, Texas, Nevada (they do not have additional tax for lottery wins; thus, only federal taxes apply), Michigan (where state tax is only 4.35%). There are also numerous organizations, which partly or fully take responsibility for paying the taxes, helping you to get exactly the sum, mentioned as your revenue (in case the tax is covered fully by these companies). It is important to know that your revenue is taxed only if it’s $ 600 or more.
Taxes for non-residents
It is easier for non-residents to pick up the prizes, because officially (if the revenue is not too high), the winner won’t be asked to provide a certificate on earnings. However, if the fact of not paying the taxes will be revealed, further legal visits to the US won’t be possible.
US tax system works professionally, and escaping from paying the taxes is not recommended. Tax services will get to know of the facts of not paying the taxes, and in the worst case almost all your revenue may be exempted, or you may even be jailed. It is better to pay the taxes even if you have been late, and missed the terminal payment date. In this case you will only get a warning from the government, if it happened to you for the first time.
Taxes for revenues in foreign lotteries
If there is a special agreement between the organizers of the lottery and the state, you are supposed to pay the tax only to the side, mentioned in the agreement. For example, if you took part in a remote lottery, which is organized by the US side in Ireland, you have to pay taxes only to the American side in case of winning (or vice versa, depending on the content of the agreement).
If there is no such agreement, you’ll have to pay taxes to both USA and Ireland. Non-residents also have to pay all taxes.