You can’t avoid paying taxes. They ensure a steady income for all of us so go figure. But what about winnings earned from gambling? Well, good news for casino players in Canada. You don’t have to pay taxes on your winnings earned from playing your favourite casino games.
Yes, unlike other countries, Canada does not charge an income tax on winnings from casual casino players. There are a few exceptions but all you need to know now is this:
If you are someone who likes to gamble and occasionally earns a profit from your gambling winnings, paying taxes shouldn’t be a concern. Let’s explore this a bit more.
What Can You Bet Online?
The first question that pops up is this: Is gambling legal in Canada? It is legal for players. So let’s talk about gambling winnings in general. The reason why the Canadian revenue agency is still reluctant about taxing gambling winnings (both land-based and online gambling winnings) is that, in most cases, this isn’t considered a steady income.
Most players gamble recreationally and can’t really make a living off their casino winnings. In other words, it wouldn’t make much sense to tax their winnings. No matter how good of a gambler you are, it’s almost impossible to always earn a steady income from just casino games.
If the Canadian government were to create a tax on gambling winnings, they would also have to consider gambling losses (with potential tax refunds) and that’s something that’s flying under the radar. In a sense, they do so deliberately because it would probably be more trouble than it’s worth. So, let’s take a look at everything Canadian players can bet on that’s tax-free:
Online Casinos and Poker
Online casinos and poker are both off the grid when it comes to gambling taxes. You may be aware that Canadian gambling laws don’t allow online casinos to be based in Canada. Because of this, most Canadian players are prompted to play casino games from an online casino that’s located overseas.
This already defeats the purpose of taxing. As far as poker is concerned, the story is pretty much the same. Whether you are playing poker from an online casino or a land-based casino, the only way you would have to pay tax is if you somehow always won, no matter the odds.
Similar to online casinos in Canada, online racebooks are very much luck-based. Even if you are someone who bets on racebooks daily, it’s pretty much impossible to consider every variable and determine with 100% accuracy who the winner is going to be.
Again, if the Internal Revenue Service does update the income tax act and classify gambling winnings taxable, they would have to consider sports betting losses too and that would lead to a whole lot of paperwork.
Betting on eSports
Betting on eSports falls into the same category as non-electronic sports. There simply isn’t a way to determine how each League of Legends player is going to behave on a certain day and determine with certainty whether they will win or not. Just like all other forms of betting, if you happen to bet on the right e-sports team and win some real money, you won’t have to pay a dime.
Taxing the Best Canadian Betting Sites
Something you might be wondering is: What about Canadian Betting sites? Do they have to pay taxes? The answer is: Absolutely.
Unlike Canadian gamblers who occasionally get lucky with their gambling winnings, Canadian Betting Sites are a business – and businesses need to pay business income taxes. It doesn’t matter that Canadian Betting sites can have more or less money depending on gambling activities. They are a business first and a gambling site later.
Do I Have to Pay Taxes on My Casino Winnings?
Professional gamblers only have to pay. So how exactly does the Canadian Government classify citizens as professional Canadian gamblers?
In theory, a pro gambler is someone who, under any circumstance, makes a living from gambling alone. A professional gambler would be classified as a freelance business and would have to pay taxes based on the amount they earned from their profession (no matter what it may be).
The Canadian Revenue Agency is very slow to determine who is a professional gambler because, again, it would have to be someone who always wins and all the signs would have to point to that individual. In a way, it would have to be a non-traditional gambler.
There’s a very good chance that you fall under the category of recreational gambler. These are simply Canadian citizens who occasionally play casino games and share gambling winnings as well as gambling losses. Since it’s impossible to determine when a recreational gambler can win or lose, the Canadian gambling tax won’t apply to them. In short, there is no tax return for this type of income.
At What Point Does Canada Revenue Agency Consider You a Professional Gambler?
If you are worried that if you keep winning at your favourite casino game that the Canada Revenue agency will give you a call, don’t be. As we’ve already mentioned, the Canadian Government is very slow to classify professional gamblers.
A professional gambler requires having the same source of income. Even if a professional gambler kept losing they would still need to maintain steady cash flow (somehow). You can probably see why it’s hard to classify professional gamblers. A professional gambler can be unemployed and yet have money pouring into his account from somewhere, although the economic benefits of gambling in Canada are a whole other story.
How Much Can I Win Before Paying Taxes?
You can win as much as you want. If you aren’t classified as a professional gambler, you won’t have to pay taxes on anything. Not even Canadian lottery winnings are taxable. Simply put, you would need to leave a consistent trace for a couple of months before the Canadian government takes interest in you.
Then they would do some background checks on your money activities and if they determine that your income was always coming from the same place (an online casino, for example), they would consider labelling you as a professional gambler.
How Does Gambling Work with Income Tax?
As we’ve already said, in order for gambling to be taxed, the government would have to treat gambling winnings as a steady source of income – and that usually isn’t the case. Sometimes you will win C$100, other times C$2,000, then you might lose C$200. Practically unless you openly claim business expenses, it’s pretty much impossible to keep track of these things.
Are Gambling Losses Tax-Deductible?
Yes, but only if you are a professional gambler. Canadian residents that actually make a living from gambling and treat their winnings as a viable source of income can indeed deduct their losses and ask for tax returns.
Are Lottery Winnings Treated Differently?
No, lottery winnings, just like any other form of gambling, are not taxable. The lottery is particularly exempt because there’s an incredibly small chance of winning. Thus, it cannot be taxable.
Is Taxation Different for Online and Offline Gambling?
No, taxation works pretty much the same way. You won’t be taxed if you play at a land-based casino just like you wouldn’t be at an online casino. When you buy chips at land-based casinos, the price of each chip already has a tax percentage but that’s for the casino to sort, not you.
What are the taxing rules like depending on region, city or province?
As far as Canada is concerned, the rules and regulations are the same in regards to gambling taxation. Tens of millions of people bet on horse racing or buy lottery tickets and they have never been taxed on any of their winnings.
What Happens If I Gamble in a Different Country?
If you gamble in a different country you have to follow that country’s rules. For example: if you gamble in the USA, then you will indeed have to pay almost half of your winnings in the form of gambling taxes.
Needless to say, this can be really discouraging, especially if you end up winning a jackpot. If you are a Canadian citizen, it’s probably best that you don’t gamble within the USA.
Taxing Gambling Winnings in Canada: Summary
So do Canadians pay taxes? In short, if you are someone who likes to gamble and makes a few dollars from the winnings, you won’t have to worry about paying taxes. On the other hand, if you are someone who continuously makes a profit from money gambling and the Canadian Revenue Agency determines that you have made a business out of it, prepare to start paying taxes as a professional gambler.
Thank you for reading our guide on Gambling Winnings Tax. We hope that it has been informative.