Do Canadians Have to Pay Tax on Online Casino Winnings?

Filing tax forms

The worst nightmare for Canadians is taxes. They are a black cloud looming over everything beautiful and bold. In terms of online gambling, one of the very first questions that players tend to ask is if they are required to pay taxes on their casino winnings. Well, we have some fantastic news for you!

If you are a citizen of Canada and a recreational player, take a deep breath and leave your tax worries behind. Consumer-friendly Canadian laws state that winnings are completely tax-free. You are not going to have anyone knocking on your front door to demand you hand over to the tax authorities. You can have lots of fun and keep every cent that you have rightfully earned. However, there are still a couple of things that are still important to discuss.

Why Are Casino Players Not Required to Pay Taxes?

Gambling activities cannot be taxed since it isn’t a constant source and of income and isn’t derived from any property, employment, or other viable sources of income. Gambling also isn’t considered to be a business and a majority of Canadians don’t make a living off of their winnings. In the eyes of the law, taxing that would not be just or fair. Gambling profits, which include lottery winnings, are viewed as a “windfall” instead of income coming from a viable source and therefore generally escape taxation. A number of factors that are listed in the CRA that might indicate whether a specific payment is considered to be a windfall. Those include whether or not a person had a specific expectation of receiving a certain payment, whether there was an expectation that these payments would recur, whether the payment was “earned” or not as a result of pursuing a profit, and whether or not the payment was a “customary income source.”

Are Canadians Required To Pay Tax On Their Online Casino Gambling Winnings?

No, they do not. Canadians are not required to pay taxes on their gambling winnings, lotteries, sports betting, horse betting, and other games of chance. However, if you do earn interest on your gambling winnings, you are legally required to declare it on a T5 form. That interest is taxable. You can be fined for fraud if you are caught not paying taxes on it.

Are Professional Gamblers Required To Pay Tax?

If you gamble full time, offline or online, and earning a living from betting, then you are required to file taxes on your earnings. Professional blackjack players, poker players, and other types of professional gamblers are considered to be running their own businesses. In Canada, this is taxable.

Some elements that must be considered in making this determination include whether or not a person has “inside information’ or “special knowledge” that enables the taxpayer to lower the element of chance, whether it is the intention of the taxpayer to gamble for profit to earning a living or pleasure and how much time is spent on gambling activities, such as the frequency and number of bets.

It has been concluded by the Canada Revenue Agency that if the main source of a person’s income is derived from online poker, then it is taxable business income, by contrast to another taxpayer who might have a full-time job but “addicted” to poker in their free time.

However, there is a catch to this. The CRA so far has been slow to assess and audit individuals whose main source of income is from gambling. The reason for that is because they are said to be operating a business and these business profits are taxable. However, these businesses may accumulate big losses which may reduce income as well as income from other types of businesses. If the CRA began to forcefully tax those professional players, there can be a really damaging domino effect across the country.

Are Canadians Required To Pay Taxes On Their Lottery Winnings?

No. The Canada Revenue Agency says you are not required to pay taxes on your OLG lottery winnings or other lottos, and you are not required to report them. However, if you do earn interest on your winnings, then that amount is subject to taxation.

How About Gambling In Vegas Or The USA As A Canadian Citizen?

US Citizens, unfortunately, must pay nearly fifty percent of any gambling winnings to the taxing authorities. If you head on over to the USA to gamble, you will be required to pay taxes on any winning over $1,200 USD. Think again, if you believe you can simply not declare it. When you go up to the booth to cash out they will deduct 30% automatically. You don’t have any say in the matter. However, if you are a Canadian Citizen who is working legally in the U.S. you are able to deduct any gambling losses that took place in the U.S. and get a tax refund based on it.

A Summary Of Canadian Gambling Tax

  • Canadian gamblers and casino players are not required to pay taxes on their winnings
  • However, if you are a professional or full-time gambler, filing taxes is required
  • If you gamble and win while you are in the USA, then you must declare your winnings
  • Lottery winnings are not taxable either

Our Disclaimer

Although we are online gambling aficionados, we are not lawyers. Canadian laws change constantly, including tax laws. If you are hesitant about not claiming gambling winnings on your taxes or are not sure about playing online, for peace of mind, consult with a tax professional.

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