Most people are terrible at dealing with taxes, and it’s not actually their fault:
Evolution made us good at spotting danger but bad at thinking straight when a screen flashes big numbers at us. The human brain sees a huge jackpot and completely forgets about the boring paperwork that comes with it.
That’s how a lot of online casino players get burned:
They win some money, forget to track it, and then April shows up and hits them like a truck. Overpaying, underreporting, getting hit with penalties, it happens all the time. If you want to protect yourself, you need to know how to keep track of what you owe, and there are a few ways to do that, which we’ll break down below.
Bonuses
A casino or online poker site awarding you a cash-equivalent bonus (such as match, reload, or free play bonuses) generally creates a taxable event when the bonus is realized or made withdrawable, not necessarily the moment it is credited, according to IRS guidance.
That’s because the bonus isn’t income until you have constructive receipt or it becomes convertible to cash.
It’s worth knowing an understanding all these details before you go and play online. Unbiased online casino review websites provide the necessary info for players. As an example, here’s the review of Verde Casino at GHZD: https://gry-hazardowe-zadarmo.com/verdecasino/; such resources also help you track bonuses and promotional offers.
Start by recording for each bonus:
- 1.The face value of the bonus awarded (e.g., $50 free play credit).
- 2.The date any bonus was credited to your account.
- 3.Any wagering requirements.
- 4.The date the bonus was redeemed in cash and the net cash result (e.g., if you got $20 cash out of a $50 bonus, a $30 net cash result in your favor).
The IRS treats bonuses and other promotional offers differently depending on the facts. Cash-equivalent gifts or promotional offers without a sweepstakes component, such as $50 free play or reload credits, go as an income when realized or made withdrawable (even in the absence of any 1099).
The New Tax Reality
Starting in 2026 and in later years, taxpayers can claim an itemized deduction on Schedule A for up to 90% of their gambling losses. The deduction cannot exceed their gambling winnings unless Congress changes the law.
The One Big Beautiful Bill Act (OBBBA) calls for a 90 percent cap. Even though you’re breaking even on gambling, you might owe the IRS money. Because even in a break-even year, you owe the IRS income tax on your gambling winnings.
But you can’t take as a deduction the full amount you lost because of the 90 percent cap:
Some people think that because they play using a netting system (total wins minus total losses), the IRS will only tax them on their profits. But that’s not how gambling losses are treated on federal income tax returns. When you itemize your deductions, you report gambling winnings as gross income. Then you can deduct gambling losses (they are not a business expense if you’re not in the profession of gambling).
You can’t deduct more than 90 percent of your losses, still capped at your winnings. The limit applies regardless of what forms your casino or internet site issues.
Forms like W2G, 1042S, or 1099MISC report winnings; they do not create an exception to the 90 percent cap. So in a break-even year, you could have to write a check to the IRS on gambling.
Tracking your gambling activity and history, including deposits, becomes a good practice.
Redemptions
When you cash out your session winnings (all or a portion) or redeem bonus credits for cash, you’re withdrawing income previously recognized. But withdrawing the money does not create a new, taxable event. (That’s what distinguishes gambling losses.) So the word “withdrawal” is a bit misleading in the tax context.
Tracking the timing of each redemption helps you show when your recognized losses were realized against your recognized gains, which is what the IRS wants.
You should also link each redemption to its origin session or bonus. That way, you’ll be able to pair each session with its associated investment and link each redemption with its original contribution of capital. If you’ve redeemed any bonus credits for cash, be sure to show the net cash result for that bonus in the bonus tab.
With cryptocurrencies, the situation gets a little more complicated:
If you’ve made a bet using bitcoins, the IRS sees your contribution of your cryptocurrency as a taxable disposition of property to gambling. As such, it may affect your gambling loss calculations. You’ll owe capital gains/losses taxes when you later convert the bitcoins or other cryptocurrency into cash.
So?
Do your best to track separate events at each step: your initial contribution of the cryptocurrency, the date you made the bet, the date you cashed out the earnings, and the date you cashed out the cryptocurrency itself, if applicable.
Also, document every step along the way with timestamps, transaction hashes, exchange rates, and cryptocurrency values in USD at each point in the process.
