Whilst most poker players earn a few bucks here and there, some professional poker players regularly earn huge amounts. So, should poker players pay any taxes on their earnings?
Taxes are part of any professional or casual poker players' concern when they take home their payout. Not paying the tax cut on your winnings in certain countries could lead to problems. In this article, we look at the tax laws in several well-known territories.
Disclaimer - We are not financial advisors nor tax advisors. This is not professional advice. This article is a collection of available information on official websites and other sources. If you need legal assistance on your poker or casino winnings, consult a professional tax advisor.
Taxation of Poker Winnings
Everyone is expected to know when the tax office of their country requires a cut of their winnings or not. Even in areas where poker players can take home their payouts without giving paying taxes, certain conditions can make someone's winnings taxable. Learning about tax laws in your area prepares you for filing your winnings and losses.
According to the IRS, all forms of gambling winnings are taxable among US residents. Winnings are filed as "other income" when you fill in their Form 1040 or Form 1040-SR. Gambling losses are deductibles and reported as "other itemized deductions." Players are required to keep receipts or any detailed recordings of their winnings and losses.
Taxes for professional players are different since their winnings are their livelihood or their income. All winnings are subjected to the effective income tax rate than regular employees must cover. Professional players must report their winnings and expenses on the IRS Schedule C. Because winnings are considered income, losses are also treated as expenses or deductibles. In addition, casinos need to report winnings that exceed a certain amount.
Good news to all UK players! Gambling income and winnings are not taxable. Even professional players can keep their earnings without having to cut a part of it for the taxmen. Instead of players, the government taxes all UKGC licensed casinos' profit instead. As per the Gambling Tax Reform 2014, only remote operators are required to pay taxes on a "place of consumption" basis as set by HMRC.
Professional UK poker players can also enjoy tax-free winnings to sustain their lifestyle. However, other forms of payment for other services such as sponsorship fees for appearing in public or ad revenue for their marketable content. Income a pro player receives as part of their trade is taxable.
Gambling taxes in France is a significant burden for online operators with a poker tax set at 37.7% as proposed by the 2020 budget bill. French gamblers are also expected to pay 2% of their cash game winnings. On the other hand, the 2020 changes on the gambling tax regulations were an improvement in previous taxing rules that harmed the country's gambling market.
Near France, the country's border-state Monaco is incredibly lenient with its taxes. Recreational and professional players do not have to worry about poker taxes when they collect their winnings. Unfortunately, the rule applies to non-residents since the government does not allow its residents to enter any gambling sites within the state.
Spain's rules on poker winnings had been unclear for several years before 2012, including the rule on deductible gambling losses. Changes in the law allow players to deduct their losses when declaring their winnings in their income tax returns. Starting a professional career with the changes make it slightly feasible. However, players are expected to pay a 47% cut from their poker player winnings.
Non-Spanish residents should also be wary of the country's tax law. Hossein Ensan, who hails from Germany, made the final table of the EPT Barcelona Main Event in 2014. Ensan cleared his taxes with the German tax offices, but Spain says it was not enough with its tax authorities demanding other payment. It goes without saying that Spanish gamblers do not have it easy with their country's tax code.
Winnings among casual poker players are non-taxable among German residents. Having all winnings tax-free makes it easy for German players to participate in online poker rooms since online gambling is within the gray area of the law. Remote poker sites are prohibited by the law, but no one within the gambling authority is moving to shut them down or are actively pursuing German residents playing in online card rooms.
For professional poker players, winnings are subjected to taxes if they are regular winners of poker tournaments as stated by the German finance court of Cologne. According to the court, "if many people with great analytical skills come together in a game of poker, the part of luck in each game is very small."
With the law set on January 1, 2019, that replaces the Lottery Act, any winnings from Swedish online poker sites are tax-free. Take note that these sites must be designed for the Swedish gaming market such as having Swedish text on the site. Swedish gaming sites must also offer withdrawals and deposits of Swedish Kronor.
Poker winnings from gaming sites that do not have a Swedish gaming license are considered taxable if it exceeds more than 100 SEK. Swedish players should also note that winnings in online sites that are outside of the EEA and are not marketed for the region are also taxable. Taxable winnings must declare the net profit as 30% of capital income.
In the country that sets the standard for regulating online gambling sites, residents do not have to worry about their winnings being taxable. Malta's tax office is already set with taxing residents a corporate tax of 35%. Even operators licensed by the MGA only pay 5% gaming tax on their gross gaming revenue.
Poker winnings among professional players living in Malta are treated differently if this is made with high frequency. Professional can expect their winnings treated as regular income which comes from a trade, business, profession, or vocation. Aspiring pro players within Malta should check with their tax office for details on the tax amount they are expected to declare.
Canadian tax laws are gambler-friendly since casual players do not have to worry about taxes on their winnings. One of the reasoning behind the tax-free winnings comes from the principle that residents use their after-tax income for poker games or other gambling activities.
When it comes to professional poker players, gambling winnings enter a grey tax area. Tax authorities regard all winnings made by grinders as their income since this is their trade or vocation. However, the tax office of the country has yet to find a strong basis for identifying a casual player to a professional one. Professional tax advisors can provide a better answer on when a grinder's winnings become taxable in Canada.
Australia has the most number of legal gamblers and poker players in the world, which is likely the result of tax-free winnings among residents of the country. Instead, the government is taxing the gambling operators within their jurisdiction. One of the reasons for the move is the government's view of winnings because of luck. In contrast, other tax regulators in different countries regard winnings as income.
For the aspiring professional poker players, "every" poker profits are not eligible for taxes. Australia's taxation office does not regard a gambling career path as an actual profession, but as a recreational activity or hobbyist pursuit.
Winnings from the lottery, poker games, horse book, and even game shows are taxable if it exceeds RS 10,000. India residents are required to declare 30% of their winnings. Gambling losses are also not deductible from their tax returns, making it a concern among professional poker players. The lack of deductibles on their winnings and the flat rate of 30% taxes can obstruct any pro player's career.
Fortunately, Indian residences have reported a loophole that states taxes only apply to single transactions. When a player withdraws less than RS 10,000 from card rooms or online sites, their winnings are tax-free. Serious poker players should still consider talking to a tax expert to know if a career in the card game is feasible in India.
Two areas within China are the focus of this section since gambling is illegal in the mainland: Hong Kong and Macau. Hong Kong's autonomy status allows its residents to participate in various gambling activities, including horse racing within the region (e.g. Happy Valley Jockey Club). It is important to note that the legality of local or remote poker games is within the gray area of the law, allowing for tax-free winnings.
Macau residents are entitled to tax-free winnings from poker rooms within its jurisdiction. Even professional players' earnings from card games are not taxable. With Macau licensed casinos paying 55% of their revenue as game taxes, it makes sense that residents do not have to worry about the government getting a cut of their windfall.
Poker income taxes are one of the inconvenient responsibilities everyone needs to take care of, including all poker players. Knowing the tax rate of your area can help you prepare for declaring your taxes and avoid getting in trouble with the law.
This article was published on December 20, 2020, and last updated on October 26, 2022.