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Tax Rules on Betting Winnings in Canada

Tax Rules On Betting Winnings In Canada

Placing a bet on your favourite sport or event is always an exciting experience, and that excitement increases further when you find out that your bet has been a successful one. One thing that many punters do not consider when placing their bets is the tax rules on betting winnings in Canada.

Depending on the amount you bet, it can be a very important matter and you should familiarize yourself with the tax laws before playing.

Online betting in Canada is a complex topic. There are many different rules and regulations that are enforced depending on your age, location, and different regulatory bodies. Different provinces provide different rules on where and when you can bet. Adding to the complexity on the subject, the tax on casino winnings within Canada is also a muddy subject. The rules stipulated provide grey areas where it can be interpreted in various ways leaving some bettors unsure of where they stand in terms of tax.

Taxes tend to instil fear or dread within most people. It is a dark cloud that looms over any potential earning increase that no one likes to see. What seemed a nice pay rise is slashed by taxes. Living life tax free is everyone’s dream, and thankfully Canadian betting provides that, to an extent.

One of the first things any gambler will ask when they are in a new country or territory is ‘Do I have to pay taxes on my winnings?’, because ultimately, they want to know how much of their earnings they will have to part with should they be successful. On top of that, they want to know where, how, and to which authority they are supposed to pay this tax.

Luckily, consumer friendly laws in Canada are kind to the casual gambler so most of us can rest assured. You won’t be chased and hounded by the state for a slice of your winnings should you win big. You can maximize the fun of betting and maximize your well-earned cash should you come into money. However, there are a few things that are worth bearing in mind though, especially when it comes to those of us who may win regularly or play considerably more than average.

Online Sports Betting Tax Rules in Canada

Generally speaking, any winnings that you make from your betting activities in Canada are not taxable unless your gambling is seen as a form of work or employment. This can be based upon the number of bets you place, your expected pay out or your overall gambling skill level. For the everyday bettor, none of your winnings will be taxable.

The reason that gambling winnings for casual bettors are not taxed is because the money is not seen as a constant source of income and did not come from a form of employment or property sale. Generally speaking, gambling is not considered a business nor does it constitute a way of making a living, so within the eyes of the Canadian law, it is deemed unfair to tax those that have benefited from a successful bet. So, whether you are betting on horse racing, football, soccer or any other sport, you will not have to pay tax.

For those it does effect, you are expected to state your earnings and provide tax information at the end of the fiscal year and comply with the regulations like you would with any other income. The grey area comes with what constitutes someone who is deemed taxable which can cause considerable confusion.

If you are a full-time gambler, whether that is online or offline, and you are seen as making a living off your gambling, then you are required to file your taxes. Whether you are a professional poker player, a blackjack player or operate any other gambling as a fulltime job, you are viewed as operating a freelance business and freelance business are taxable in Canadian territories.

The Canada Revenue Agency can be particularly slow to assess or audit those who fall under this category. This is because gambling can either see your business (if you are a full-time gambler) make significant profits, or heavy losses. It is a highly volatile business that is as chaotic as it is unpredictable. If the CRA forcibly taxes every pro player, there could be an economically damaging domino effect as incomes drop and people invest less in the economy. It must be clearly stated here that we are in no way advocating not paying tax, we are just supplying as much information as possible on a particularly complicated matter.

Canada Lottery Winner Tax Rules

So, we have covered the tax rules around sports betting and online casinos, as well as how you only have to pay tax on your winnings if it is deemed a freelance business or constant stream of money. Playing or participating in a lottery is obviously very similar to gambling. You are placing a stake, or buying a ticket in the lotteries case, with the hope that your chosen bet or chosen numbers are correct. However, where poker, blackjack or sports betting differ from lotteries, is your likelihood of winning.

There is a skillset for playing poker and sports betting. Professional poker players consistently win big money and can enhance their skills by playing better players more frequently. Likewise, although not fool proof, professional gamblers can hone their skills by analysing more data and processing more information to increase your knowledge and likelihood of being successful. 

When it comes to lotteries, it is exactly that – a lottery. Your chances of winning hangs on pure luck, so it cannot possibly be judged as a steady stream of income or a potential freelance business. You have purchased a ticket, and you are waiting to see if your ticket is the lucky winner. For this reason, the Canadian Revenue Agency states that you do not have to pay tax on any potential winnings from OLG or any other lotto. This means that once you have received your winnings you do not have to declare or report them, you simply just have to enjoy them.

Canadians Betting in the USA

Whether it be for vacation or for business, many Canadians regularly travel south of the border into the United States and will wonder what tax rules will apply to them when gambling over there. The United States tax laws are very different to those found on Canadian soil. If you win anything more than $1200 USD, you will have to pay tax on it.

Now you might be thinking ‘We are only here for a short stay and have no plans on heading back any time soon, so I can just not pay it and get away with it.’ Well, sadly, think again. The system in place over there sees 30% of winnings over $1200 USD automatically deducted before you have gone to the booth to collect it. It is not a matter of declaring it. It is taken before you even get your hands on it. 

All of that being said, the rules are slightly different for Canadian citizens legally working in the United States as you can deduct any gambling losses that occurred over there, and you will receive a tax refund based upon the figures you submit.

Conclusion

Both tax laws and gambling laws are susceptible to regular policy change, so if you are interested in learning more about how tax is deducted from betting, casino or lottery winnings, it is always worth taking a look at the latest legislation to ensure there has been no updates that state differently to the contents of this article. That goes for the rules south of the border, too. 

Thankfully, the current rules in Canada state that many of us who enjoy a flutter on sporting events, in the casinos or on a lottery ticket, will not have to pay any tax should we be fortunate enough to win. For those of you who are skilled poker players, blackjack players or professional gamblers, you will have to ensure that you make a note of your winnings and submit tax returns that reflect them.

Tax Rules on Betting Winnings in Canada - FAQ

Do I have to pay tax on my sports bet winnings in Canada?

Although it is a fairly complex law, typically the answer is no. For your casual bettors, no tax is paid on sports bet or casino winnings. However, if you are deemed to earn a steady income from your betting strategy then you are deemed a freelance business and you will have to pay tax on your earnings.

Do I have to pay tax on my lottery winnings in Canada?

Lottery wins are not so complicated, nor do they provide any grey area. Quite simply, no lottery player will have to declare their winnings or pay tax on any of their lottery winnings, so you can enjoy every last cent.

Do professional gamblers have to pay tax in Canada?

Yes. If you are deemed to be a professional gambler in Canada, which is classified by you earning a steady income stream from your gambling strategy, then you will have to file and pay the appropriate level of tax on your winnings.