When asking, are casino winnings taxable in Canada, it’s critical to have the full picture. Click here for a guide on Canadian gambling.
If you enjoy money gambling, Canada is the perfect place for you, but the first question on most punters’ minds is, are casino winnings taxable in Canada? The most straightforward answer is that most Canadian gamblers won’t pay any income tax on their winnings.
The laws in Canada regarding the ownership of online casino sites are stringent. Regardless of the mobile casino options at your disposal, it is illegal for anyone other than the government to own and operate gambling venues (the Jackpot City mobile casino is the perfect example). Nevertheless, there is a way to go around these laws. Many online casino operators from this country choose to open their businesses in other parts of the world where online gambling is legal. They then offer their services to Canadian customers.
However, the laws that apply to players are less strict. Canadian gamblers can play at any online casino regardless of its location. Additionally, you won’t have to pay taxes on your winnings, unlike in the US, where there’s a 30% tax on winnings above $1,200.
Regardless, the idea of not taxing winnings from gambling is older than this nation and first appeared in England. The principle states that gambling winnings should not be taxed unless the person makes a living solely from it or treats gambling as a business. Individuals must rarely pay a tax on prizes for bets on lotteries, gambling, horse racing, poker, and other luck-based contests.
Are Casino Winnings Taxable in Canada? Yes and No – Here’s Why
Unless you’re a professional gambler, as defined in the Income Tax Act’s paragraph 40(2)(f), you don’t need to declare winnings from gambling when you file your taxes. To determine if someone is gambling for a living, the government considers a few key elements.
Simultaneously, it is critical to note that the gambling tax laws differ from the Criminal Code laws that regulate gambling across Canada.
When asking, are casino winnings taxable in Canada, it is not enough to be a regular gambler or consistent winner for the law to see you as a professional punter? However, some things can qualify as professional. These include treating your passion as a business or using a systematic application and skillful expertise to consistently make a profit.
This skill makes pool and poker players more professional than those who wager on casino or sports games. Therefore, it is critical to consider whether gambling is your sole source of income. If you don’t have a job or a career, it’s more likely that the law will see you as a professional.
Gambling Purely For Fun
Taxes on winnings do not exist because of non-professional gamblers. After all, there are countless non-professional gamblers whose passion ranges from recreational to outright compulsive. However, as long as they don’t make a living from it, they do not need to pay any taxes on winnings. It is also vital to remember that gambling losses are non-deductible from income unless you are a professional.
Canadian law doesn’t allow classifying people as professionals unless under precise circumstances. Therefore, most people don’t pay taxes on winnings. In other words, Canadian non-professional gamblers don’t pay taxes on winnings from popular gambling games, including, but not limited to:
- Scratch & Win Tickets
- Sports betting
- Casino Games
- Poker (most common game whose winnings are taxable in Canada)
- Online Gambling
What’s The Most I Can Win Before Having To Pay Taxes?
When asking, are casino winnings taxable in Canada, it doesn’t matter how much you win. The question of tax on gambling winnings is not about how much. Canadian lottery winners regularly win tens to millions of dollars without paying a penny in taxes. It’s about your ability to make a living gambling.
The Relationship Between Gambling & Income Tax
Suppose you do not use your gambling income to make a living, and the Canadian Revenue Agency, therefore, does not consider you a professional gambler. There is no income tax on gambling winnings, regardless of whether you play in a contest or game.
However, if the CRA considers you a professional gambler, it will treat your winnings as income and tax them in the same way as regular jobs. The upside to this option is deducting your losses and expenses from your income if you treat your gambling sessions like a business. Therefore, your net income determines your income tax bracket, meaning it’s critical to keep detailed records.
For example, if you make living gambling and you make $45,000, your tax bracket would be 15%. This means that you get to keep $38,250. These are the basic income tax brackets for everyone in Canada, even professional gamblers:
Income Tax vs. %Income
- 15% – $46,605
- 20.5% – $46,603
- 26% – 51,281
- 29% – $61,353
- 33% – $205,842
So, when looking at casino winnings taxable in Canada, the income tax in this country is only applicable to professional gamblers. You pay no income tax if you are a recreational gambler with another career or job.
Taxation Rules For Online vs. Offline Gambling
According to the Income Tax Act, there is no distinction between online and offline gambling. Therefore, it is safe to follow the same rules for both. You won’t have to pay taxes on gambling winnings, whether they’re online, at a racetrack, or casino.
Online poker is a type of gambling that is often considered professional. Because poker’s skill component is widely accepted as significant, it is more common to make a living from poker than other forms of gambling.
Differences in Rules Between Regions, Cities, and Provinces
Although gambling laws vary from one province to another, they all apply when it comes to taxation. When asking are casino winnings taxable in Canada, it is critical to determine whether you are making professional bets. If you don’t have a job and are using the same skill to win, and it’s been going on for several years, then the letter of the law will likely see you as a professional gambler. Therefore, you should pay taxes on your earnings.
What About Gambling From Another Country?
It is essential to be familiar with the tax rules if you are a Canadian gambler in the United States. The reason is that winnings may result in a 30% tax.
These two countries have a tax treaty that includes the IRS taxing Canadians who gamble in America. If you can prove that you suffered gambling losses, you can get your money back. Consequently, you’ll get more money back if the amount of provable losses you’ve suffered is higher. However, you must first apply for a US tax number and fill out the required forms to recover your money. Therefore, when asking are casino winnings taxable in Canada, the answer is that they are, but only if you make a living as a professional gambler.