In a previous article we discussed the idea of Canadian players coming to the U.S. and hitting a jackpot. The process for that is one we hear a lot from players as being cumbersome. But one Canadian player wondered what happens when the tables are turned:
What about the other way around. If you’re American. Come to Canada for a visit and hit a jackpot, we don’t pay taxes here but will you have to pay when you return?
Brian L.
When U.S. residents play anywhere outside the U.S., winnings are considered income, just like it is if you win in the U.S. In some places, like Carnival cruise ships, they follow the same rules as in the U.S. In Canada, there’s no reporting requirements (there’s no taxable jackpot level) so they don’t take those steps.
Whether you get that paper or not, and whether you hit a payout that reaches the level of a paper or not, that income is still supposed to be reported to the IRS and factored into your taxes.
But like winnings that fall under the reportable limit, whether players actually do that is another story, as many players don’t report all gambling winnings, as the IRS guidance tells players to do. Whether they don’t can be for a variety of reasons – they don’t know they have to, they choose not to. But ultimately it’s one of those things that many players simply don’t do.
It’s also one of the reasons many players want to see the jackpot reporting limit raised to $5,000. Yes, for some, it reduces the paperwork… but technically it shouldn’t because you’re supposed to report ALL winnings, regardless of whether you got a piece of paper or not. (Of course, if you can itemize on your taxes, you’re also allowed to deduct all losses up to the amount of the winnings.)
So yes, theoretically, we do have to pay taxes on those winnings when we return. Whether we do… that’s up to each player and how they handle their taxes, and whether they do so honestly.
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