ARE SPORTSBOOK WINNINGS TAXED?
Let’s suppose that you have struck gold and have won some good cash on a bet. What next? Should you spend all of it, or should you use part of the money to pay your taxes? Are the winnings taxable? Well, this question is quite a bit of a grey area. It depends on where you live, as those are the regulations that you should follow. Let us look at some of the policies governing winnings in the United Kingdom and the United States.
The United Kingdom
For people living in the UK, betting is bliss as they do not pay taxes on winnings. It does not matter if you place wagers online or offline. Either way, you get to walk away with the whole amount. Also, you do not need to declare the winnings when filing your tax returns. How great is that!
This lack of taxes owes to an abolishment spearheaded in 2001. At the time, people parted with up to 6.75% of their winnings in paying taxes. Legislations came into play, which allowed people to walk away with all their cash. It was in a bid to encourage betting companies to set up shop in the region. In so doing, they would create revenue and employment opportunities for the citizens.
Does that mean that no taxes are applicable when it comes to gambling in the UK? The answer to this is no. There is a tax known as the point of consumption tax, and this applies to gambling. Luckily, this does not affect the people placing wagers.
What lies in the future? Well, the viability of taxing winnings is quite small given the current tax system. The system works such that it takes a cut of the winnings. It also compensates for losses incurred in income-deriving activities. Given that most people lose money when wagering, the system would be on the losing end. Unless there is a change in legislation, this taxing mechanism will not work.
The United States
When betting in the United States, you should be aware that you are not exempt from paying taxes on your winnings. You can get some exemptions when paying tax on capital gains but cannot enjoy the same when it comes to betting. That is to say that the government will get a chunk of your cash. As you think about how much you will take home, you should have this in mind.
Also, reporting of the winnings takes place. If you bet with a company X, that site will report your earnings to the government. Companies do this per the law, or else they lose their operating licenses. That means that the system will catch up to you one way or another. Some companies will report each win while others will work with cumulative values for specific periods. But you get the gist here- the system knows about you.
People try to avoid paying taxes by not withdrawing the cash from their online accounts. However, that will not work. It does not change the fact that it is income from wagering, and you owe the system a part of it. It will not matter if the money is in your hands or an account somewhere. You owe the system, and it will come-a-calling. If you would prefer to stay out of jail, you should comply with the taxation laws in the country.
Thus, begs the question, how much do you owe the government? Well, it depends. If you have not exceeded six hundred dollars in your total winnings in a year, you are in luck. You are free not to submit how much money you won when filing your income tax records. Anything above six hundred dollars is subject to taxation, and you should get the proper forms for this.
How does this work? It is quite simple, and it operates as a profit and loss account. Suppose you made one thousand last year but made losses amounting to seven hundred. In this case, you made three hundred, and you can do without the submission. In most cases, people pay a federal tax that amounts to 24%. However, this rate can go up when the winnings are higher owing to the change in the tax bracket. Note that different states will charge you different tax rates. Also, if you win in State A and you live in State B, you owe the taxes to State A.
Find out what applies to you to avoid risking a jail term. All the best!