How Do Gambling Proceeds Get Taxed in Canada?

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Tax. Image Credit: Shutterstock

Benjamin Franklin once remarked that nothing in this world is certain besides death and taxes. Love them or loathe them, gambling taxes play an essential role in the world of gambling. 

So, it might surprise you that Canadians don’t have to pay any taxes on gambling online in Canada. This includes online casinos, sports betting, horse racing, lotteries, and other games of luck.

Gambling activities in Canada are not taxed because they are not viewed as continuous sources of primary income and are not derived from owning property, employment, or viable alternative sources of revenue. Gambling is also not considered a business in Canada, and most locals don’t make a living from their winnings. Thus, in the eyes of the law, taxing these proceeds would be unfair and unjust.   

Taxes on Interest-Earning Casino Wins in Canada

However, if you earn any interest on your winnings, you are obliged to declare that amount, which then becomes taxable. If you try to circumvent this requirement, you risk being slapped with a substantial fine by the Canada Revenue Agency (CRA). Also, professional gamblers who make their living from playing games of luck must declare all their proceeds to the taxman.

It is interesting to point out that, so far, the CRA hasn’t been that efficient when it comes to auditing individuals whose main source of income stems from gambling. This ineptness has quickly made a few professional Canadian gamblers very rich. Ultimately, everyone should pay taxes, although forcefully taxing professional players could lead to a damaging domino effect across Canada.  

Taxes on Lottery Wins in Canada

According to the Canada Revenue Agency, a punter is exempt from paying taxes on lottery winnings from OLG or other lotteries. But, if you earn interest on these wins, that amount could be subject to taxation.

How Are Gambling Wins Taxed in the USA?

When looking at the broader North American market, it is noteworthy to mention that gambling tax laws south of our border are far more stringent. US citizens are expected to cough up nearly half of their winnings to the taxman. This directive applies to all winnings that exceed US$1,200. 

And for those who think they are smart enough to ignore this obligation, think again. When you walk up to the cage excited about cashing out your big jackpot, 30% of your winnings is automatically deducted from your stash.

As a Canadian citizen who is legally employed in the US, you are permitted to deduct your gambling losses accrued in the States and get a tax refund based on that figure.

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