So my brother-in-law is visiting from overseas and I will be taking him to Vegas for some gambling and fun. Lets say that he beats the odds and wins a million bucks from a slot machine.
How does the casino take care of the tax issue? I assume that they will withhold some of the winnings to send to the IRS, but how much? If they take too much, does he have the right to fill out a tax return and get the rest back?
In theory, if he’s from a country that has a tax treaty with the US excluding gambling winnings, he can fill out an IRS form called W-8BEN (Certificate of Foreign Status), and prevent the withholding. Otherwise, they will withhold the standard amount, and he has to file a 1040NR or 1040NR-EZ to get a refund.
Does the UK have such a treaty with the US?
(Incidentally, I’m amazed Americans stand for being taxed on gambling and game-show winnings - isn’t it bad enough that the house has an edge, without then having to give up a big chunk of whatever you do manage to win? In the UK, gambling (and game-show) winnings are tax-free.)
In general, anything that can be taxed as a gain can be used to offset tax if there is a loss. I believe that is the case with gambling winnings/losses in the US. This being the case, a gambler who also earns an income/has other capital gains may actually benefit under the US system, as opposed to that in the UK where gambling losses cannot be used to offset other taxable gains.
Anecdote: an acquaintance of mine told a story of how he won a large poker prize in a US casino. The casino wanted to pay him the amount net of tax. Our hero, as a non-US-taxpayer, insisted they pay out every last cent of the full amount, which they apparently did, reluctantly. This was probably several years ago, however, and may have been embellished.
[QUOTE=Colophon]
Does the UK have such a treaty with the US?
(Incidentally, I’m amazed Americans stand for being taxed on gambling and game-show winnings - isn’t it bad enough that the house has an edge, without then having to give up a big chunk of whatever you do manage to win? In the UK, gambling (and game-show) winnings are tax-free.)
[/QUOTE]
Yes, the US does have a tax treaty with the UK. It has one with many countries where there’s a lot of international financial activity and foreign travel. With Canada and Belgium for sure, and lots of others as well.
Ed
[QUOTE=suranyi]
Yes, the US does have a tax treaty with the UK. It has one with many countries where there’s a lot of international financial activity and foreign travel. ** With Canada and Belgium for sure, **and lots of others as well.
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So does that mean I wouldn’t get taxed in Vegas, because I don’t get taxed on lottery winnings here in Ontario?
[sub]Not that I’ve ever won more than twelve bucks at one go…
:: mutter :: grumble :: [/sub]
[QUOTE=Colophon]
Does the UK have such a treaty with the US?
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Described herein is the procedure for obtaining prior exemption from payment of casino tax at source.
If an international tax identification number is not held by a UK citizen then tax is withheld at 30% and a refund form must be filed as indicated by yabob. However, and I’m unsure of the date applicable to the linked piece, it further states as follows:
Note also that:
[QUOTE=Dead Cat]
In general, anything that can be taxed as a gain can be used to offset tax if there is a loss. I believe that is the case with gambling winnings/losses in the US. This being the case, a gambler who also earns an income/has other capital gains may actually benefit under the US system, as opposed to that in the UK where gambling losses cannot be used to offset other taxable gains.
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Seriously? So say I’m a US citizen and earn $100k this year, I could claim I have a gambling habit and lost $50k, and I’ll only get taxed on $50k? :dubious:
Unless casinos hand out receipts every time you sit down and buy in, I can’t see how this is policed.
Gambling winnings aren’t taxed as gains - they are taxed as income. You may deduct losses, but only up to the amount of gambling income. IRS topic 419:
[QUOTE=Colophon]
Unless casinos hand out receipts every time you sit down and buy in, I can’t see how this is policed.
[/QUOTE]
Well, they are not going to just take your word for it. You have to have some record of your losses:
[QUOTE=Sunspace]
So does that mean I wouldn’t get taxed in Vegas, because I don’t get taxed on lottery winnings here in Ontario?
[sub]Not that I’ve ever won more than twelve bucks at one go…
:: mutter :: grumble :: [/sub]
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If you want information on the US-Canada tax treaty, here it is. (Warning: PDF)
I am a little familiar with some provisions because my father gets retirement income from both Canada and the U.S. and the treaty indicates how that situation is handled.
Ed
[QUOTE=Colophon]
Seriously? So say I’m a US citizen and earn $100k this year, I could claim I have a gambling habit and lost $50k, and I’ll only get taxed on $50k? :dubious:
Unless casinos hand out receipts every time you sit down and buy in, I can’t see how this is policed.
[/QUOTE]
In NYC you can apparently pay less tax on your lotto winnings if you show them a stack of losing tickets that you purchased. I think it only works on lotto winnings and not on your total income.
I learned all this from gamblers while I operated the lotto machine. So I could be very wrong.