Check a gambler’s adrenaline level when anticipating a huge win and you’ll see how high into the heavens it is.
The thought of tax is usually the last thing on their mind as they watch the wheels spin, their team score points, and the dice roll.
But when the game and the adrenaline rush are over, there is still that question that may be bugging a gambler’s mind: are casino winnings taxable in Canada?
Are gambling winnings taxable in Canada?
Here’s the answer.
Are Gambling Winnings Taxable in Canada?
Although the law on gambling income taxation in Canada appears tricky, one thing is sure: gambling winnings tax Canada is a myth except for professionals who take it as a job.
Based on paragraph 40(2) (f) of the Income Tax Law,
“Canadians do not have to pay taxes on gambling winnings from the likes of horse racing, sports betting, lotteries, online casinos, and other games of chance.”
In Canada, casino winnings are not on the list of regular income sources, which is why it’s not usually taxed.
So, you can hit the jackpot and spend it all for yourself without the fear of running into trouble with the taxman.
So long as you are gambling as a hobby or something you do on rare occasions, no gambling winnings tax Canada.
This also applies to people who constantly win.
According to the gambling income laws in Canada, no matter how much you win gambling, it’s still not considered taxable.
Also, using all your savings to gamble does not mean you would pay taxes on winnings, either.
You might just need to step up on your responsible gambling tactics to help you cut down losses.
One way to gamble responsibly is to read casino reviews from CasinoCanada.
The review tells you the casinos that offer free spins, bonuses, and cashback so you don’t have to use your money all the time.
Gamblers are only required to pay tax on interest earned on their winnings.
The tax law has no claim on your gambling winnings but you are required to declare any interest earned.
Hiding it may only land you in trouble. Use a statement of investment or a T5 form to declare any interest earned.
However, in the case of professional gamblers who see gambling as their source of income, their winnings are taxable.
Yes, professional gamblers in Canada are required to pay taxes on their winnings. Here are some direct quotes to support this.
According the CRA’s guideline,
“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,”
It’s worth noting that it may be difficult to know when to draw a line between professional gambling and gambling as a hobby.
This is why the Minister of National Revenue decides when to draw these lines based on some factors.
For instance, it can be based on the person`s gambling activities, special gambling skills, organization, insider’s tip, etc.
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How Gambling Tax Law Work in Canada
The Canadian Income Tax Act poses a tax on every income from regular sources, both in Canada and outside.
This could be income from businesses, employment, properties, shares, and others.
Fortunately for gamblers in Canada, winnings from gambling activities are considered windfall gains and are not taxable.
However, the Canadian Tax Court still retains the right to declare a gambler’s winnings as taxable.
This is done after analyzing the gambler`s activities and looking out for the following;
- The pattern of the gambler’s winnings
- Any added advantage that the gambler may have such as expertise in a particular game
- The frequency of the gambler`s gambling activities
- The amount of money they stake at a time
- The motives of the gambler, whether for fun or to earn a living.
- The gambling income tax is applicable to the place they reside.
There can be taxes on casino winnings Canada if the court declares the person a professional gambler.
If the court finds you to be strategically involved in games of chance always, the Canada Revenue Agency may tag your gambling activities as a business.
This will qualify you to be called a professional gambler and you will be taxed.
Pool sharks and high rollers like Michael Watson and Daniel Negreanu are considered professional gamblers because of their activities.
They take gambling as their main source of income and are known to make lots of money from it.
These people pay taxes on their winnings and they know all about gambling winnings tax Canada and beyond.
Is Gambling Loss Tax Deductible in Canada?
Just like business persons, professional gamblers can claim to have incurred gambling losses and this will reduce the taxability of their income.
They consider their losses as business expenses and can write them off to reduce tax.
As a professional gambler in Canada, instead of asking; are casino winnings taxable in Canada?
Get a tax professional to put your gambling income records in check and inform you when to expect a taxation.
Final Thought
To wrap up, taxes on casino winnings Canada depend on many factors.
While the gambling winnings tax Canada exempts nonprofessional players, some criteria qualify a gambler for taxation.
These criteria include the skills that they may have, the gaming frequency, and others.
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