Taxes are something that is important for us all. It helps to build infrastructure, healthcare and serves the Canadian people well. But, paying taxes is not always fun especially if you have won a large sum of money. But us Canadians are a lucky bunch. If you are a recreational player and has a Canadian citizenship, you don’t have to pay taxes on your winnings. The laws of gambling in Canada are very consumer friendly, thus making winnings you got from a land-based casino or an online casino, totally tax-free. So you don’t have to worry about unwelcome surprises. Though there are still some things that we need to shed some light on.
Why don’t you have to pay taxes on your winnings?
Well, since playing at the best Canadian casinos does not count as a reliable source of income, property, or other viable sources of earning money, you can’t be taxed. You can’t really call gambling a business and it is hard to make a living gambling online so according to Canadian law, it would not be fair to tax players lucky enough getting a big win. Which to us also sounds fair. Gambling is a form of entertainment and not a sustainable way to earn money. You, because of the risks involved.
So no taxation what so ever?
If you are a Canadian citizen you don’t have to pay for taxes if you have won playing online casino, betting on horse races, sports or winning the lottery. But, if you invest your winnings and earn interest, you must declare this legally via a T5 form. Since the interest is taxable (depending on how much you’ve gained) you could be fined if you have not properly accounted for it. Ask an accountant if you are unsure how the law works.
Professional Gambling and taxes
Professional Gamblers who make a living on gambling like poker players, need to file taxes. This is because professional gamblers are seen as freelance business owners. And that is taxable according to Canadian tax laws. It does not matter if you are a pro-sports better or Blackjack player, when you gambling is seen as an income, you have to pay taxes.
But, the CRA (Canada Revenue Agency) is having a bit of a problem auditing and assessing this kind of ”freelance business”. If you operate a business and make a profit, you have to pay taxes. And that is fair. But, professional gamblers can also accumulate large losses which reduce income significantly. So starting to heavily tax these players could create a poor outcome for many different businesses throughout the entire country.
If you are a Pro Gambler, you need to pay taxes but we wanted you to know the full scope of the situation. If you are making it big in the gambling world, we recommend you hire a trustworthy accountant to help you handle your winnings. And also, congratulations if this is the case!
Gambling in the USA as a Citizen of Canada
No country seems to be more afraid of taxes then Uncle Tom. But when it comes to gambling, almost half of your winnings will be deducted as tax. However, it’s not until you win $1200 USD or more you have to pay tax. If you play at the land-based casino and cash out at the cashiers, they will automatically deduct 30% of your winnings. However, and this is awesome, if you are a Canadian Citizen who is working legally in the states, you can deduct losses from gambling you made in the states and get a tax refund! Ah, it’s good to be Canadian ey?
So, gamble on you brave soul
With some of the best tax laws in the world, Canada is a great country for those who love to gamble. Just remember to play smart and never bet more money than you have. Unfortunately, it’s easier to lose than win. For any questions about gambling and tax, reach out to the CRA to be certain you are doing everything right.