Are Lottery Winnings Taxable? A Guide to Gambling and Taxes in Germany

Millions of Germans enjoy gambling in various forms. But are the winnings from these activities taxable? The answer, as with many things, depends on luck.

Whether it’s the lottery, casinos, sports betting, or TV quiz shows, Germans participate wherever there’s a chance to win. According to a report by the Gemeinsamen Glücksspielbehörde der Länder (GGL), the joint gaming authority of the states, 36.5 percent of Germans participated in at least one form of gambling in 2023. While the odds of winning are often slim, many dream of hitting the jackpot. Most people have probably wondered what they would do with a million-euro win. A villa on the beach? An expensive sports car? But does anyone think about paying taxes on the money? And do you even have to?

Lottery Wins: Tax-Free Luck?

The odds of winning the lottery are incredibly low, at 1 in 140 million. But lottery payouts also occur for matching fewer numbers. For the lucky winners, there’s more good news: lottery winnings are generally tax-free. This is because the lottery is considered a matter of luck and doesn’t fall under any of the income types regulated by the income tax law.

However, the Vereinigte Lohnsteuerhilfe e.V. points out that interest earned on lottery winnings is taxable. If you invest the winnings and earn interest, this falls under capital gains, and taxes are due.

Casinos and Sports Betting: Are Winnings Tax-Free?

Many people in Germany try their luck at slot machines in bars, pubs, and casinos. The payouts from these machines are not subject to taxes. The chances of winning are based on luck, and it’s generally not considered a commercial activity. But what about betting on sports events? The principle remains the same: if the income is derived purely from luck, the winnings do not have to be taxed as income.

However, the government isn’t entirely left out. Since 2012, providers of online sports betting have had to pay 5 percent tax on all revenue in Germany, according to Computerbild.de. How this ultimately affects the betting customer can vary. In many cases, this tax is already due when placing the bet. With other providers, the odds are adjusted downwards accordingly.

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Poker Winnings: Luck or Skill?

The situation is slightly different with online casinos and, above all, with poker. Because it is generally considered a game of chance, poker winnings are actually tax-free. However, a distinction is made between casual players and professional players. This was decided by the Bundesfinanzhof (BFH), the Federal Fiscal Court, in a judgment from February 2023.

The necessary distinction from private activities, for players as well as for athletes, depends on whether the taxpayer satisfies private gaming needs like a recreational or hobby player, or whether, in the overall view, structural-commercial aspects are decisively in the foreground.

In poker, analytical thinking and strategic gameplay have a significant impact on the chances of winning. For professional players, gambling becomes a game of skill and is therefore taxable.

Money Won on TV Quiz Shows: “Who Wants to Be a Millionaire?”

One form of gambling that tax theorists don’t entirely agree on is money won on TV shows. The show “Who Wants to Be a Millionaire?” in particular, repeatedly poses difficult questions for tax experts. As the magazine SteuerberaterScout explains, winnings from “Who Wants to Be a Millionaire?” are usually classified as tax-free in practice. The argument is that answering the questions correctly requires not only knowledge but also luck.

The candidates can only prepare to a limited extent and cannot influence which questions they are asked. At the same time, SteuerberaterScout recommends listing the income from TV shows in the tax return to be on the safe side, in case the tax authorities still demand a portion of the winnings.