Are Online Bitcoin Lotteries Taxable?
Introduction – Bitcoin Lottery
You would have seen or played some kind of lottery in your childhood. The lottery is a game of chance where the player is made to be allotted with a set of random numbers. Then the random sequence is drawn, and who-so-ever has the same sequence of numbers wins the lottery. Basically the players need the right sequence of numbers in order to win the amount. Lotteries are quite popular and even legal in many of the countries.
With the recent popularity of Bitcoin as an alternate currency, the same is being used for lottery games too. There are many lottery websites that let you play the online lotteries using Bitcoin as the currency.
Also, many of the online crypto casinos have added Bitcoin lottery in their portfolio of games.
One big advantage of the Bitcoin lottery is the fairness of the game. The whole process is extremely transparent because of blockchain technology. And moreover, everything is on the decentralised ledger and hence publicly verifiable, be it details of participants, draws, or winners.
It also removes any geographical boundaries or any local financial institution.
How to win the Bitcoin lottery?
The lotteries are popular because of their simplicity in playing. You have to purchase your playing ticket with your Bitcoin or Bitcoin cash. After you purchase the ticket, you follow certain steps to play the lottery. These steps are mostly similar to any traditional lottery.
You make the random selection of numbers from a pool of numbers. For example you can choose 6 numbers ranging from 1 to 100. Then the lottery operating system will randomly select out the numbers from the same pool of numbers. This is called “draw”. If this sequence of numbers matches your sequence, you become the winner.
Matching all the numbers in the same sequence will make you win the jackpot. Jackpot is generally a huge amount of reward and is simply incredible. Of course there are prizes for other combinations too. The value is obviously lesser than the jackpot for these combinations.
Different Bitcoin lotteries have different payout structures. Even the rules differ too when it is about selecting the numbers of choice. Make sure to check the asterisk terms & conditions (printed in small font) before you purchase your free Bitcoin lottery ticket.
How much can I win when playing Bitcoin lottery games?
Since the amounts are in virtual currency, there isn’t any such limit on how much you can win. There are websites offering you to win as high as $200 every hour from the Bitcoin lottery. You can even earn upto$7500 in a week in the form of Bitcoins.
Are online Bitcoin lotteries Taxable?
There are little guidelines related to Bitcoin taxation, and it also differs from country to country. If you are a US citizen, you may likely get a tax document to pay the taxes. The Internal Revenue Service sees cryptocurrency as the source of gain (loss) and hence the property for tax purposes.
In fact, IRS has issued several guidelines relating to taxation on cryptocurrency
- The time you are holding the currency will decide the term of holding the currency. If you are holding (purchase to sale of coin) the currency for less than a year, it will be short term. Likewise, holding the currency for more than a year will make it fall under long term capital gain. Taxation rules were applied in respect to the long or short-term capital gain.
- Your tax filing status and taxable income also determines the tax bracket you will fall into. Hence the tax rate would be levied on your Bitcoin profits.
A lottery is one of the oldest forms of trying your luck and winning huge amounts of money. Now Bitcoins and other similar cryptocurrencies are also accepted. The lottery systems have become much more transparent and fair. Hence more and more people are confident to gamble in the lottery with Bitcoins.
With the inclusion of cryptocurrency in the lottery system, people across countries can play and win huge amounts of money. The winning prizes are much higher now. Even the process of you getting the Bitcoins of the prize amount is quite fast.