Separate taxes

[ester11]

Are there separate taxes to pay besides your local income taxes when you win alot of money online? Are there any penalties because its gambling money? Do you have to pay taxes to the country that is hosting the games?

[kelkat]

Oooh. Good question. I would think that income is income and that you will pay a high rate of income tax in your state. But the legality issue is interesting. How do you handle that if your state doesn't allow gambling.

Hmm. I think I'll call my accountant Monday. It'll give him something to do over the week.

[Avian]

I would assume that it is illegal to gamble online if your state doesn't allow it. That was the major justification for the new legislation. You would probably just have to keep it quiet. I'm not sure about the tax issue as far as the host country though, you'll have to get back to us about it.

[r8rpwr]

For U.S. federal tax purposes, income is taxable regardless of whether the method of earning it is legal. Enforcement is another matter, of course.

I don't know what every state has to say on the matter but many states mirror the federal tax code in many respects and off the cuff I would say that many of them agree with the federal law on this particular issue.