Guide to gambling & tax in Canada

Do I have to pay tax on my casino winnings?

It depends but probably no.

Unless you're a professional gambler, as defined by paragraph 40(2)(f) of the Income Tax Act, you don't have to declare gambling winnings when you file your taxes. The government looks at a few key factors to determine whether someone is making a living from gambling and should therefore pay taxes on their winnings.

It's also important to remember that gambling tax laws are different to the Criminal Code laws that regulate gambling in Canada as a whole.

Professional Gamblers

Just spending a lot of time gambling and even being a consistent winner is not enough to make you a professional in the eyes of the law. Some of the things that CAN classify you as a pro, however, include if you run your gambling operation like a business and/or you use a systematic application of skill or expertise to consistently make a profit.

The skill piece is why poker and pool players are more frequently classified as professionals compared to people who bet on sports or casino games. Another important point is whether the gambling is your only source of income. You're way more likely to be classified as a professional if you don't have another job or career.

For Fun Gamblers

Non-professional gamblers never have to pay taxes on winnings, regardless of how much they play or how much they win. Non-pros run the spectrum from recreational bettors to compulsive gamblers but as long as they're not making a living doing it, none of them have to pay taxes on gambling winnings. It's important to realize that you also cannot deduct gambling losses from your income unless you're a professional.

The truth is, in Canada the law is reluctant to classify people as professionals unless it's a really clear-cut case so most of the time people aren't paying taxes on their winnings. Check out this guide for more information.

Non-professional gamblers in Canada don't have to pay taxes on winnings from any popular gambling games including but not limited to:

Lotteries

Scratch
& Win Tickets

Sports Betting

Casino Games

Poker

Online Gambling

How does gambling work with income tax?

Like we explained before, if you don't make a living gambling and are therefore not a “professional gambler” in the eyes of the Canadian Revenue Agency, you pay absolutely zero income tax on your gambling winnings regardless of what kind of game or contest you play.

If CRA does deem you to be a professional gambler, your winnings are considered to be your income and will be taxed according to the same rules as other regular jobs. One upside is that if you run your gambling operation like a business, you can also deduct losses and expenses from your income just like other people who are self-employed or run their own businesses. Income tax brackets are based on your net income so make sure to keep meticulous records and use all the deductions allowed.

For example

Here are the basic income tax brackets that apply to everyone in Canada, including professional gamblers

Is taxation different for online and offline gambling?

The Income Tax Act doesn't make a big distinction between online and offline gambling and it's safe to apply the same rules to both. If you're not a professional you don't have to pay taxes on gambling prizes regardless of whether it's online or in a real casino or racetrack, for example.

One category of online gambling that is more commonly classified as a professional activity is online poker. That's because the skill component of poker is generally accepted to be significant which makes it more common for people to make a living playing poker compared to other forms of gambling.

Do the rules differ by region, city or province?

Different provinces have different gambling laws that control things like casinos and online gambling but when it comes to paying tax on winnings, the same rules apply no matter where you live in Canada.

The big question is always whether you're making bets in a professional capacity. If you have no other job, you're using a skill to win consistently and you do it for a number of years in a row, chances are you're a professional gambler and should pay tax on your earnings.

What happens if I gamble in a different country?

If you're a Canadian gambling in the United States it's really important to understand the rules around taxes. That's because when you win, you may be subject to a 30% withholding tax on your winnings.

Canada and the US have a special tax treaty that includes the IRS taxing Canadians who win money gambling in America. The good news is that you can get it back if you're able to prove gambling losses or expenses. The bigger the losses you can prove, the more of your money you'll get back. First you have to apply for a US tax number and then complete the necessary forms to recoup your money.