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As more online casinos and betting platforms accept cryptocurrencies, the crypto gambling industry is flourishing. But it’s important to understand the tax implications of these transactions to avoid last-minute tax burdens.

This article breaks down everything you need to know about crypto gambling taxes and how to report your crypto gains in Germany.

What is Crypto Gambling?

Crypto gambling allows you to place bets online using cryptocurrencies. This digital mode of wagering is gaining traction due to its immersive casino experience minus the geographical constraints. 

Hundreds of online gambling sites are offering players a wide range of betting options and secure transactions – without users having to ever leave their homes.

Is It Illegal?

Crypto gambling is legalized in countries such as Germany, the UK, Canada, and Sweden. However, it is not considered taxable unless it is your primary income source.

In the USA, online gambling is legal except for a few states. Know the legalities of crypto gambling in your state before participating.

How is Crypto Gambling Taxed?

As per IRS, crypto gambling winnings are considered taxable income. If you are a US taxpayer, you have to report your crypto gambling income as "other income" in Form 1040. 

In countries such as Germany, Canada, the UK, and Sweden, you don’t have to pay taxes on your gambling winnings unless it’s your primary source of income.

However, you still need to maintain the records of your gambling transactions. This is because in almost all countries, including jurisdictions which do not tax gambling income, you may incur taxes if you dispose of your crypto rewards.

Whether you realize a gain or loss depends on how the price of your crypto reward changes from the time you first received it. 

Crypto Gambling Winnings Tax Rate

In Germany, cryptocurrency is viewed as a private asset rather than a property. This means it is subject to Income Tax and not Capital Gains Tax.

If you hold your gambling winnings for more than a year before its disposal, you will pay no taxes on your crypto gains.

If you dispose of your crypto reward in less than twelve months, you will pay income tax on the profits you make - up to 45% - plus 5.5% Solidarity Tax. This is applicable if you earn more than €600 per tax year.

Here’s the income tax rate for the financial year 2022:

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Here’s the applicable tax rate for short-term gains on crypto (2023):

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To learn more about Germany crypto tax, refer to the guide here.

Can You Write Off Crypto Gambling Losses?

If you dispose of your crypto gambling reward within one year and realize a loss, it is not considered taxable. You can use these losses to offset any profits that you have made in a given financial year.

In case you don’t have any profits to offset, you can carry forward your losses to future tax years.

How to Calculate Crypto Gambling Taxes?

To calculate your crypto gambling taxes in Germany, consider the following steps:

• Determine Cost Basis For Crypto Gambling Taxes: Crypto taxes are calculated using the FIFO method if units cannot be individually identified
• Use A Crypto Tax Software: Use a crypto tax software like Kryptos to automatically identify taxable transactions and calculate your tax liability.

Which Other Countries Don’t Tax Crypto Gambling Winnings?

Apart from Germany, there are many other countries where crypto gambling winnings are not considered income. This includes:

• Austria
• Australia
• Belgium
• Bulgaria
• Canada 
• Czech Republic
• Denmark
• Finland
• Hungary
• Italy
• Luxembourg
• Malta
• Romania
• Sweden
• United Kingdom 

However, you may still need to pay taxes on any crypto gains that you make by disposing of your gambling rewards. Please consult a tax professional for your specific region.

How To Report Crypto Gambling Taxes?

The Germany tax deadline is on 31st July for each financial year. While your gambling winnings are not taxed in countries like Germany, you may still need to report any short-term crypto gains you make by disposing of your rewards.

Use crypto tax software like Kryptos to keep a record of your transactions and even automatically calculate any applicable taxes. 

Once you have calculated your crypto gambling taxes using the app, you can directly download your tax report and file it on BZSt's online tax platform.

FAQs

1. How is crypto gambling taxed?

In Germany, gambling winnings, including those from crypto gambling, are generally not taxed. This is because they do not fall under the definition of 'income' as per the country's tax laws.

2. What are the advantages of crypto gambling?

Crypto gambling offers multiple advantages including quick and secure transactions, a degree of anonymity. It also allow players to utilize the platforms without geographical restrictions.

3. What are the risks of crypto gambling?

While there are advantages, crypto gambling also comes with its share of risks. Not all crypto gambling sites are regulated, meaning you could potentially fall victim to scams. Also, because transactions are irreversible, if you make a mistake while transferring your crypto, you cannot get it back.

4. What can I do if I was scammed by a crypto gambling site?

If you suspect you've been scammed by a crypto gambling site, the first step is to report the incident to the relevant local authorities. In Germany, you can report to the Federal Criminal Police Office (BKA).

5. Are gambling losses deductible?

If you dispose of your crypto reward within one year and realize a loss, it is not considered taxable. You can use these losses to offset any profits that you have made in a given financial year.

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All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!