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.
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
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]
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:
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:
Well, they are not going to just take your word for it. You have to have some record of your losses:
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
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.