How to avoid Canadian gambling taxes?
According to Paragraph 40 (2)(F) of the Canadian Income Tax Act, providing the player doesn’t live from betting, the winnings are completely free of taxation.
Understanding Gambling Winnings Tax in Canada
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Most gamblers stay laser-focused on winning big, dreaming of going pro and living off betting. But when you add Canadian taxes into the mix, sticking to casual play might be a smarter move. In Canada, all your winnings are tax-free—as long as gambling isn’t your main job.
Understanding Gambling Income and its Taxation
The taxman sees gamblers as two groups: pros and casuals. Pros are those who gamble to make a living. If they earn money from gambling, they’ll need to pay Federal tax at these rates:
| Income Tax | Income Range |
|---|---|
| 15% | C$46,605 |
| 20.5% | C$46,603 |
| 26% | C$51,281 |
| 29% | C$61,353 |
| 33% | C$205,842+ |
Over 99% of Canadian gamblers fall under the recreational title. Although many will spend considerable sums on games, sports betting, or buying lottery tickets, gambling isn’t their prime income source. So there’s no excise to pay on any winnings. In other words, you can check an online gambling review, choose a casino, and play for fun once in a while. In this case, winnings will go straight to your pockets.
Factors Determining Gambling Winnings Tax Canada
The law doesn’t just assume someone winning millions is a pro gambler. The Revenue Agency looks at a few things to figure out if someone is gambling professionally:
- Gambling is their main way to make money.
- They’ve been earning from gambling for a long time.
- They’ve learned about gambling and do it often.
- They regularly join tournaments and travel to gamble.
- They keep a tight gambling routine.
- They plan to depend on gambling to make a living.
Reporting Gambling Winnings
Extra earnings from gambling, like stock dividends or interest from savings linked to casino or sportsbook winnings, must be reported to the CRA using forms T3, T5, or T5013. Depending on the amount, expect to pay between 15% and 33%.
The easiest way to file gaming taxes in Canada is by signing up for direct deposit or filing online. Electronic returns are usually processed in a few weeks. The deadline to file is April 30, and all payments need to be made by May 1. It’s a smart move to follow Canadian tax rules and chat with a tax lawyer to make sure everything’s sorted.
Claiming Gambling Losses
Professional gamblers can claim back gambling losses as a business expense, as with any other business costs. For this, players need to maintain accurate records of their gambling activities, with receipts and documentation helping verify their gambling income. It goes without saying that recreational players get no tax write-offs for their gambling losses.
What’s Exempt from Tax and What Isn’t?
All Canadians, including gamblers, get a tax-free allowance called the Basic Personal Amount, set at C$14,298. Any income over this amount gets taxed. Since it’s not always clear what makes someone a recreational or professional gambler, the CRA usually takes its time when auditing pro gamblers.
Distinction Between Amateur and Professional Gamblers
In 2002, the Supreme Court set out criteria to help decide whether gambling is considered a hobby or a business.
- Is the gambler betting for personal gain or one that has the intention to make a profit?
- If betting is not for personal gain, does the income come from a business?
The underlying problem is that, on a subjective level, every gambler wants to turn a profit. But for the average bettor, enjoying casino games or sports betting without it being their primary source of income, there’s no need to worry. There is no gambling winning tax Canada to pay.
Special Cases of Gambling Taxes
With so many different types of betting available, let’s look to see the Canadian taxpayers’ obligations across various gambling activities.
On Lottery Winnings
Unlike in the US, lottery winnings north of the border aren’t taxable. They’re considered “windfalls,” which are the results of games of chance as opposed to games of skill. However, when lottery winnings go towards a savings plan or financial portfolio, regular taxes on lottery winnings Canada come into force. Also, if some of this new-found wealth is given to relatives or friends, expect to pay a donation charge.
Pay Taxes on Casino Winnings Canada
Providing that gambling isn’t the player’s business or livelihood, all winnings stemming from casino games, whether played online or offline, are totally duty-free.
On Poker Winnings
The majority of poker players consider the game to require great skills but, if there’s talk of taxation, lots will suddenly become nervous and revert to saying poker’s a game of chance! That’s because there have been a number of court cases trying to determine the level of skill that could lead to poker being included as taxable income. Still, these have tended to focus on how the winnings were earned, organized poker training, and the player’s capabilities to turn a profit. In short, a trained poker player who regularly makes a profit will have to pay income tax.
On Sports Betting
Canadians have enjoyed sports betting since 1985. But up until August 2021, solely parlay bets and pari-mutuel gambling via the provincial lottery systems were legal. Though a change in the law now allows single-game sports betting, there still remain very few retail sportsbooks. Thanks to this, most Canadian sports bettors utilized offshore sports betting platforms. Providing sports betting isn’t the main income source, then no amount of winnings is taxable.
On Cryptocurrencies
Like regular betting, cryptos aren’t taxed under Capital Gains or Ordinary Income Tax unless used professionally. Capital Gains taxes apply to the ups and downs of your crypto “assets,” with 50% taxed. But crypto-staking and mining rewards are taxed fully at 100%. Simply holding crypto in a wallet isn’t taxed. However, these situations will be:
- Selling crypto
- Trading or exchanging crypto
- Gifting crypto
- Using crypto to buy goods and services
- Converting crypto to Canadian Dollars
So, using crypto to fund an online gambling account for gambling is tariff-free.
Provincial Variations in Gambling Tax Laws
Canadian players who make a living by playing online games or sports betting not only have to pay a Federal tax of 15% – 33% but also a provincial tax. These add a minimum of around 4% – 10.8% on top. Let’s examine each province’s min/max tax rates:
| Province/Territory | Min Rate | Income Range for Min Rate | Max Rate | Income Range for Max Rate |
|---|---|---|---|---|
| Ontario | 5.05% | First C$46,226 | 13.16% | C$220,000+ |
| Alberta | 10% | First C$131,220 | 15% | C$314,928+ |
| British Columbia | 5.06% | First C$43,070 | 20.5% | C$227,091+ |
| Manitoba | 10.8% | First C$34,431 | 17.4% | C$74,416+ |
| New Brunswick | 9.68% | First C$44,887 | 20.3% | C$166,280+ |
| Newfoundland & Labrador | 8.7% | First C$39,147 | 21.8% | C$1,000,000+ |
| Northwest Territories | 5.9% | First C$45,462 | 14.05% | C$147,826+ |
| Nova Scotia | 8.79% | First C$29,590 | 21% | C$150,000+ |
| Nunavut | 4% | First C$47,862 | 11.5% | C$155,625+ |
| Prince Edward Island | 9.8% | First C$31,984 | 16.7% | C$63,969+ |
| Quebec | 15% | First C$46,295 | 25.75% | C$112,655+ |
| Saskatchewan | 10.5% | First C$46,773 | 14.5% | C$133,638+ |
| Yukon | 6.4% | First C$50,197 | 15% | C$500,000+ |
Taxation of Canadian and International Casinos
A Cunuck gambler who, for example, crosses the southern border on a gambling trip to Las Vegas, will have to declare winnings over $1,200 to the IRS, with 30% of winnings being deducted as duty. But there is some good news in that it’s possible to deduct gambling losses at the same time (these deducted losses cannot be greater than any winnings). In the casino, fill in Form W-7 to obtain an Individual Taxpayer ID Number and file a Non-Resident tax return.
FAQ
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Are Canadian lottery winnings taxed?
No, they’re not. The Tax Office doesn’t view lottery winnings tax Canada as necessary as these types of wins are classed as “windfalls” – unexpected payments akin to inheritances and gifts.
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Are gambling winnings taxable in Canada?
Generally, no. The single proviso is that the winner should be a professional gambler. As with all incomes, winners will have to pay duty on their annual net profits.
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Is sports betting taxable in Canada?
No, it’s not. Winnings earned thanks to recreational betting aren’t considered taxable.
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How much tax on gambling winnings Canada?
Professional gamblers must pay taxes of 15% – 33% on net yearly income from gambling. Recreational players can keep their winnings tax-free.
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Are gambling losses deductible?
Only providing it’s a professional gambler living from betting.
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How Does Canadian Tax Law Differentiate Between Gambling as a Hobby and a Business?
A lot depends on whether gambling is a hobby or run like a business. This is a fine line, but a lot is down to the player’s intentions. If a hobby is being pursued without any profitable intention, it’s not regarded as a business, and there should be no Canada gambling tax. However, if the majority of income originates from gambling, duty will need to be paid.