Guide on gambling taxes in Canada

Do I have to pay tax on my casino winnings?

In most cases, no, you don't have to pay taxes on any winnings. Paragraph 40(2)(f) of the Income Tax Act states that you won't need to pay income tax on your casino winnings unless you are a professional gambler. This exemption stands no matter how much you win, which games you win on, or whether you win at a land-based or online casino. Even the lottery is tax-free in Canada, so residents have the potential to win millions and keep the lot.

There are only two occasions when you would need to pay tax on online gambling winnings. The first is if the government considers you a professional gambler whose profits result from a business-like operation. The second is if you earn interest on your recreational gambling winnings. You’ll need to report any interest from gambling winnings on your tax return, but any interest that totals over $50 will require you to fill in a T5 slip (or 'Statement of Investment Income'.)

All other gambling profits are free from tax. However, whatever game you choose to play and whether you're a professional or not, it's still important to gamble responsibly.

How does the CRA consider you a professional gambler?

The Canadian Revenue Agency (CRA) considers you a professional gambler if you treat your gambling habits as a business. This means you rely on gambling as your primary (or only) income source and use skill and expert knowledge to secure consistent wins.

To qualify as a professional gambler, you might demonstrate some of the following traits:

• Proof of consistent and long-term profit

• Dedicating extensive amounts of time to pursuing these profits (usually a few years)

• Travelling frequently for tournaments

• Maintaining careful records of wins, losses, and expenses

• Running a gambling operation as a business

• Taking classes or consulting with experts to improve skills and strategies.

However, it takes more than winning consistently to be considered a professional gambler. Professionals typically focus on one skill-based game, such as poker or blackjack, and tend to stick to that when playing.

Playing luck-based games like slots and roulette means it's near impossible to use skills and experience to increase your chances. Therefore, even if you land a string of significant wins, you almost certainly won't be classed as a professional.

For example, 'for fun' gamblers might do more of the following:

• Have a primary income that isn't gambling-related

• Gamble infrequently

• Gamble for enjoyment, not profit

• Win consistently on luck-based games (like slots and roulette)

• Play free casino games

• Have a good knowledge of skill-based games, but not beyond the average player.

Professional gambler tax

Most bettors won't need to worry about professional gambler tax as it takes a fair amount of time and consistent winning on skill-based games to tip you into the 'professional' category.

Check out the table below for more information on which forms of gambling a professional may have to pay tax:

How does gambling work with income tax?

Canadian bettors are generally split into two categories: those who gamble for fun and those who gamble professionally. Residents who gamble 'for fun' won't need to pay any tax on their winnings.

However, professionals will be subject to income tax with the amount determined by their gambling profits.

Canada and US tax treaty gambling winnings

Tax laws in Canada are very different from those in the US. The Canada and US Tax Treaty was established to prevent confusion when gambling over the border.

The general rules to watch out for are:

• Canadians must comply with US regulations when gambling on US soil

• The US IRS will charge a 30% tax withholding on winnings over $1,200

• The 30% tax applies to all gambling winnings, including slots, table games, poker, bingo, and sports betting

• Canadians can claim a tax refund on any gambling losses in the US (as per Article XXII of the Canada-U.S. tax treaty).

Claiming gambling winnings on taxes

Gambling winnings are considered 'windfalls' under Canadian tax laws, so bettors who play for fun won't need to report them.

You'll only have to pay tax as a recreational gambler if you earn interest on your winnings. In this case, the interest you earn is considered 'investment income', and you must report it on a T5 form.

Your bank or financial institution will automatically issue you a T5 slip if the total is over $50. If it’s under $50, you won't receive a slip but you’ll still need to report it on your tax return.

Professional gamblers are liable to pay between 15% and 33% on their winnings, which they must report alongside their tax return. The CRA will consider you a professional gambler if these winnings are your primary source of income, so you'll need to claim them on your taxes. However, unlike recreational or 'for fun' bettors, professional players can write off their gambling losses and business-related expenses like travel costs and entry fees.

Claiming gambling losses

Claiming back your losses from gambling in the US can be tedious, but it's worth it. For US citizens, roulette, blackjack, craps, and baccarat winnings are excluded from tax. However, anything a Canadian bettor wins on US soil is taxable and subject to the 30% withholding rate. Therefore, you'll need to know how to claim back your Canada US tax treaty gambling winnings.

Say, for example, you're a Canadian citizen living and working in the US:

• You take a trip to Vegas and score $1,500 on a slot machine

• The 30% tax withholding automatically applies to your winnings, so you'll walk away with $1,050

• You want to claim back this loss in winnings, so apply for an Individual Taxpayer Identification Number (ITIN)

• You then file a 1040NR (Non-resident Alien Incom Tax Return) form and can recoup your losses in full as a tax refund.

To process gambling loss claims, you must provide proof of losses. This proof can take the form of a gambling diary (with records detailing the casino, visit date, time of your session, amount won, amount spent, etc.), casino-issued gaming cards or a financial statement of your time in the US. It's important to note that your total losses cannot exceed your total winnings.

Canada gambling taxes FAQs