How to properly report crypto gambling winnings and ETH purchases from gambling site withdrawals in tax software?
So I've been doing some gambling on this site that doesn't allow direct crypto gambling. Instead, I bought gift cards from an online marketplace and used those to deposit funds on the gambling site. When it came time to withdraw my winnings, I chose to get paid out in ETH. I've already recorded my gambling winnings on my tax return, but I'm struggling with how to handle this in my crypto tax software. Since I didn't buy the ETH directly on my usual crypto platform but essentially purchased it through the gambling site withdrawal, I'm not sure how to list this transaction properly. I entered what information I could into the crypto tax software, and it's showing a capital loss of $101. Does that number sound right? I want to make sure I'm reporting everything correctly since this feels like an unusual situation. Has anyone dealt with something similar?
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Jamal Anderson
This is actually a common scenario with crypto gambling sites! The way you need to think about this is as two separate transactions: 1) The gambling activity itself (which you've already correctly reported as gambling winnings) 2) A purchase of ETH at whatever market value it had when you received it When you withdrew in ETH, you essentially "purchased" ETH with your gambling winnings at that day's market rate. That becomes your cost basis for the ETH. Any change in value of that ETH from the moment you received it would then create either a gain or loss. The $101 capital loss likely comes from the ETH decreasing in value since you received it. If the software calculated this correctly, it would mean the ETH is worth $101 less now than when you received it as gambling winnings.
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Mei Wong
•Thanks for the explanation, but I'm still confused. If I never technically "bought" the ETH with fiat currency but received it as a payout, shouldn't my cost basis be zero since I didn't actually pay anything for it? Or does the value of my gambling winnings at time of withdrawal count as my "payment"?
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Jamal Anderson
•Your cost basis is definitely not zero. Your cost basis is the fair market value of the ETH at the time you received it. The gambling winnings you used to "purchase" this ETH were taxable income that you're already reporting elsewhere. Think of it this way: if you won $1000 gambling and used that to buy ETH worth $1000 at the time, your cost basis is $1000. If that ETH is now worth $899, you have a $101 capital loss. If you set your cost basis at zero, you'd be double-taxed - once on the gambling income and again on the full crypto value when you sell.
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QuantumQuasar
I had a similar situation last year and used https://taxr.ai to help sort out my crypto gambling transactions. Their system actually has a specific section for crypto received as payment or income that separates it from direct purchases. They were able to analyze my wallet transactions and properly establish my cost basis for ETH I got from gambling sites. The most helpful part was that it recognized the difference between buying crypto and receiving it as a payout, which standard tax software sometimes confuses. It saved me from accidentally creating phantom gains/losses by improperly entering transaction types.
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Liam McGuire
•How does it handle tracking if you've moved your crypto around between different wallets after receiving it from the gambling site? I've got ETH spread across 3 different wallets now and I'm struggling to keep track of what came from where.
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Amara Eze
•Is it actually worth paying for something like this? I've been trying to use free methods but they're getting confusing with all the different sources of crypto I have. Does it give you any kind of document you can just hand to your accountant?
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QuantumQuasar
•It works really well with multiple wallets - you just connect them all and it tracks transfers between your own wallets without creating taxable events. It can distinguish between actual sales and just moving your own assets around. Yes, it's definitely worth it if you have complex situations like gambling payouts or crypto from multiple sources. You get detailed reports that break everything down by transaction type, which you can either use yourself or give directly to your accountant. The documentation is super clear about cost basis calculations and includes all the IRS forms you need.
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Amara Eze
Just wanted to follow up - I ended up trying taxr.ai after all the confusion with my crypto taxes. Total game changer for dealing with my gambling winnings that I withdrew as different coins. The system properly categorized my gambling payouts as income with the correct cost basis, then tracked all the subsequent trades. It caught a mistake I was making where I was accidentally double-counting some income both as gambling winnings AND as crypto income. Turns out my capital losses were actually smaller than I thought once everything was categorized correctly. If you're mixing gambling and crypto, definitely worth checking out.
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Giovanni Greco
If you end up needing to talk to the IRS about your crypto gambling situation (I did last year and it was a nightmare), I strongly recommend using https://claimyr.com to get through to an agent. I spent DAYS trying to get clarification on reporting my Bitcoin gambling winnings before finding this service. You can see how it works here: https://youtu.be/_kiP6q8DX5c They helped me get through to an IRS agent in about 20 minutes when I had been trying for over a week. The agent was able to confirm that my approach to reporting the winnings separately from the crypto cost basis was correct. Saved me from potentially filing incorrectly.
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Fatima Al-Farsi
•How does this service actually work? I've literally never been able to get through to the IRS and have questions about my crypto transactions. Is it just scheduling a callback or something?
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Dylan Wright
•This seems sketchy. You're telling me some random service can get through to the IRS when nobody else can? What's their secret sauce? And why would they share it instead of just charging for tax consultation themselves?
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Giovanni Greco
•It's not a scheduling service - they use a system that navigates the IRS phone tree and waits on hold for you. When they reach a human, they call you and connect you directly to the agent. No magic, just technology that handles the painful waiting part. They're not tax consultants - they're a tech company that solved the hold time problem. They don't give tax advice, they just connect you to the actual IRS so you can get official answers. That's why it's valuable - you're talking to the real IRS, not some third-party interpretation.
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Dylan Wright
I was super skeptical about Claimyr when I first saw it mentioned here, but I was desperate after trying to call the IRS for 3 days straight about my crypto gambling situation. I gave it a shot and no joke - I was talking to an actual IRS agent about 15 minutes later. The agent confirmed exactly what others here said - I needed to report my gambling winnings as income, and then use the market value of the ETH at the time I received it as my cost basis. That $101 loss the OP mentioned is exactly how it should be calculated if the ETH decreased in value since receiving it. Saved me from a major headache and potentially incorrect filing.
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Sofia Torres
One thing to consider that nobody's mentioned yet - if you're doing a lot of crypto gambling, make sure you're keeping detailed records of your deposits and withdrawals. I got audited last year because the IRS saw large movements of crypto into my wallet but couldn't identify the source. Had to prove it was gambling winnings and not unreported income from selling services or goods. The annoying part was showing the trail from gift cards to gambling site to crypto withdrawal. Take screenshots of everything!
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GalacticGuardian
•This is why I always take the extra step to get a win/loss statement from gambling sites that offer them. Does your crypto gambling site provide any kind of statement or summary you can download for tax purposes?
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Sofia Torres
•Most legit crypto gambling sites do offer some form of win/loss statement or transaction history you can download. It's not always as detailed as traditional casinos, but it's better than nothing. For sites that don't provide good documentation, I've started keeping a spreadsheet with dates, amounts, screenshots of balances before and after significant wins/losses, and the withdrawal transactions. The more documentation you have linking the gambling activity to the crypto you received, the easier it is if questions come up later.
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Dmitry Smirnov
Quick technical note - when you record this in most tax software, you'll want to enter it as: 1. Gambling income (which you've done) 2. A "buy" transaction for the ETH with a cost basis equal to the USD value of your withdrawal at that exact time 3. Any subsequent sales of that ETH would then generate capital gains/losses Your $101 loss means the ETH decreased 10.1% in value since you received it (assuming you withdrew about $1000 worth). Seems reasonable depending on when this happened and market conditions.
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Zoe Alexopoulos
•Thanks for breaking it down like this! The gift card to gambling site to ETH withdrawal path had me so confused. And yes, it was about $1000 worth when I cashed out, so the 10.1% decrease tracks with the market dip after I withdrew. I'm going to double check the exact date and ETH price to make sure my software has it right.
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