Ok so here’s my situation. I play online poker on a website that the only way to get money on and off the website is via crypto. I made a significant amount of money playing poker and I cashed out using USDT which they sent to my Coinbase account. I then exchanged the USDT for cash and transferred it to my bank account. Is that now considered a crypto sale where I’m going to owe money?

I’ve never bought or sold crypto so this is confusing.

3 points JustinCPA

The gambling winnings are taxable. The USDT will have a cost basis equal to your winnings so when you sell it it’s a taxable event but you won’t have a gain or loss since it’s a stablecoin.

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1 points smor729

The USDT will have a cost basis equal to your winnings

Can you explain what this means? Not op, but say for example I deposit 500 dollars to a site, play and win 100, and cash out 600 in crypto, which I then sell immediately. How will I be taxed on that 600 in a way that takes into account that only 100 of it is taxable income. Also how will that differ if I'm taking the standard deduction vs itemized? Thanks!

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2 points JustinCPA

You will report $100 of gambling income on schedule 1. The 600 USDT has a cost basis equal to $600. So if you sell the 600 USDT for $600 cash, you have a taxable event but your gain/loss is $0.

So you’ll report a 600 USDT disposal on your 8949 showing $600 proceeds, $600 cost basis, $0 gain, and then you’ll report the $100 of gambling income on schedule 1.

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1 points smor729

Got it, thank you.

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1 points VeeHS

sounds like a nightmare.

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1 points book83

Yes you have bought crypto, thats how you funded your account lol

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1 points shehancpa
Shehan from CoinTracker here.

Gambling winnings received in USDT --> gambling income, which you need to report on Form 1040.

USDT to cash --> if it's not perfectly pegged to USD, you will have a tiny capital gain or loss. Either way, you still have to report this on Form 8949 to comply with taxes.
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