Crypto Gambling Taxes in the U.S.

Crypto gambling sites have so far been able to side-step most regulation, but U.S. bettors must still report crypto gambling taxes. Learn more.

Hannah Foltz
ByHannah Foltz Expert reviewed byTynisa (Ty) Gaines, EAUpdated on September 8, 2022 · minute read

TokenTax content follows strict guidelines for editorial accuracy and integrity.

Key Takeaways

  • For U.S. taxpayers, crypto gambling income must be reported as "other income" on your Form 1040.

Crypto Gambling Taxes in the U.S.

From slots to sports betting, online cryptocurrency gambling is on the rise. There are now more than 70 online crypto casinos. [1]By accepting bitcoin and other cryptocurrencies—and setting up headquarters outside the U.S—so far, they’ve been able to largely side step federal and state laws prohibiting and/or regulating online casinos and sports betting. 

However, while bitcoin gambling sites may be able to skirt U.S. gambling regulations, winnings earned from them are still subject to federal taxes at your ordinary income tax rate

Read more about paying taxes on crypto gambling below. 

How is crypto gambling taxed? 

When received, crypto gambling winnings are taxed as ordinary income at a federal and state level; your tax rates depend on your gross income, but range from 0 to 37%. If you have gambling winnings from a U.S.-based operation, typically a flat 24% will be withheld by the payer; these are estimated taxes, and you may owe more or less depending on your personal circumstances. 

However, crypto casinos and betting sites will not make this automatic deduction for you. You need to report gambling winnings as “other income” on your Schedule 1 Form 1040. 

Additionally, when you sell or trade your crypto gambling winnings for fiat or another coin, you will report and pay crypto capital gains taxes on any increase in its value. 

How do I calculate crypto gambling income? 

Bitcoin gambling income is taxed at its fair market value when it is earned. For example, if you won .25 BTC from a sports bet when BTC was valued at $30,000, you would report $7,500 of taxable income.

Crypto gambling tax example

  • You win .25 BTC from a sports bet when BTC was valued at $30,000.

  • You report $7,500 of taxable income.

How do I calculate the cost basis of crypto gambling winnings?

When you sell or trade crypto gambling winnings, you are realizing a capital gain or loss on the difference in the asset’s value when you acquired it versus when you disposed of it.  The capital gain (or loss) you report on your taxes is equal to your total proceeds minus your cost basis. Your cost basis is the price you acquired the asset for, plus any applicable fees.

Can I write off crypto gambling losses? 

You can deduct losses from crypto gambling—but only up to the amount of your crypto winnings and only if they exceed the standard deduction and any other allowable deductions. In other words, you can’t use gambling losses to offset earnings from investments or other income. 

For example, imagining all other conditions are met, if you won $3,000 of BTC from online gambling, but lost $5,000 from gambling during the same period, you would only be able to deduct $3,000 of those losses. 

Is crypto gambling taxed in other countries?

Many countries do not tax gambling winnings, provided gambling is not how you make your living. If you are a resident of one of the following countries, you may not need to report your crypto gambling winnings on your taxes. Make sure to contact a local tax accountant for confirmation.

However, you will want to still keep a record of your winning transactions, so that you have the necessary information to calculate your crypto capital gains or losses at the time you sell or swap the assets. 

To stay up to date on the latest, follow TokenTax on Twitter @tokentax.

Related Content

References

Last reviewed by Tynisa (Ty) Gaines, EA on September 8, 2022 · Sources

Hannah Foltz
Hannah FoltzBrand Strategy & Insights at TokenTax
Hannah, who holds an MA in technical communication, joined TokenTax after working in B2B brand strategy.
Tynisa (Ty) Gaines
Reviewed byTynisa (Ty) GainesProject Manager at TokenTax
Tynisa (Ty) Gaines, EA has more than 20 years of experience as a tax professional. Ty has published numerous tax articles, two tax e-books, and an academic publication on cryptocurrency for the National Income Tax Workbook.

Let’s get started.

Check out our plans and pricing to find out which solution best meets your needs.

Review plans