Tax Status of Gambling Winnings in Canada

Understand when and why the Canada Revenue Agency taxes certain gambling winnings and the exceptions involved.

Updated: June 11, 2024

Winning Big in Canada? Are Gambling Winnings Taxable in Canada?

If you’ve struck it lucky with a big win in the gambling world in Canada, you’re likely asking one critical question: ‘Do I have to pay tax on gambling winnings in Canada?’ The short answer is that gambling payouts are generally not subject to tax. Yet, certain circumstances, like being a professional gambler, could make your winnings taxable as business income.

Tax Rules for Gambling Winnings in Canada

In Canada, you usually don't have to pay taxes on casual gambling winnings. This includes money you win from lotteries, casinos (both in-person and online), sports betting, and horse racing. However, it's a good idea to keep detailed records and receipts of all your gambling winnings and losses, even small amounts. That way, you have the documentation if the tax agency ever audits you.

The Role of the Canada Revenue Agency (CRA)

The Canada Revenue Agency (CRA) is the government organization that decides whether gambling profits need to be taxed in Canada. Normally, the CRA does not withhold taxes from these types of winnings unless you are a non-resident or won an extremely large prize under certain gaming rules.

However, there are certain situations where the CRA will treat gambling winnings as taxable business income. This applies when someone's gambling activities meet certain criteria that indicate it is being done professionally or commercially to make a profit rather than just as a hobby.

Additionally, if you invest any of your gambling winnings, any interest, dividends, or capital gains earned on those investments is considered taxable income under Canadian tax laws. For example, if you win big at a casino and put that money into a savings account earning interest, you must report that interest income to the CRA.

Non-Taxable Windfalls vs. Taxable Business Income

In Canada, there are two main ways the government views gambling winnings for tax purposes:

Non-Taxable Windfalls

This refers to gambling wins that are based purely on chance and luck, with no skill or systematic effort to profit involved. Typical examples include:

The Canada Revenue Agency (CRA) considers these types of windfalls non-taxable. Since they result from random chance, they are not viewed as income that needs to be taxed.

Case Study: John

For instance, John, an occasional lottery player, experiences this first hand when he randomly wins $100,000 from a scratch ticket. The Canada Revenue Agency (CRA) considers such winnings a non-taxable windfall because they are based on sheer luck and John does not engage in lottery playing as a systematic business activity.

Taxable Business Income

On the other hand, if your gambling profits come from activities that involve skill, strategy, and an intentional effort to earn income consistently, those winnings are considered taxable business income.

This category applies especially to professional gamblers and skilled players who:

A clear example would be a professional poker player who makes a living through skilled poker play, whether online or at casino tournaments.

Case Study: Jane

Jane, a professional sports bettor, exemplifies this scenario. She spends considerable time researching teams and trends and places bets strategically to generate consistent profits. Her approach to gambling is methodical and business-like, making her gambling income taxable. Jane’s diligent tracking of her activities and outcomes demonstrates to the CRA that her betting is a professional pursuit, subject to taxation as business income.

Online Games

The same general tax rules that apply to in-person gambling also apply to online activities such as poker, casino games, sports betting sites, etc. Any winnings are typically considered non-taxable windfall profits for casual recreational online players who gamble for fun and entertainment. 

However, if you gamble online in a dedicated, systematic way with the intent of making it a profit-seeking business, those winnings are considered taxable income.  For these professional-level online gamblers, winnings must be declared as taxable business income on their tax returns. But they can also deduct allowable expenses like buy-ins, subscription fees, coaching/training, etc.

So, in essence, the dividing line is whether your online gambling activities are just casual entertainment or an intentional, skilled, profit-seeking operation treated as a business. Only the latter is taxable in Canada.

Reporting Your Wins: How to Declare Gambling Income

Suppose your gambling activities are considered a business or professional pursuit by the Canada Revenue Agency (CRA). In that case, it's important to report all of your winnings as taxable income when filing your taxes each year. Here are some tips on how to do this correctly:

Use the Right Tax Forms

Depending on the specifics of your gambling income, you'll likely need to use certain tax forms such as:

If you're unsure which forms apply to your situation, speaking with a tax professional for guidance is a good idea.

Keep Detailed Records

Good record-keeping is essential for properly reporting gambling income. Maintain a log tracking details like:

Having clear documentation makes tax filing much easier and shows the CRA you are treating your gambling activities as a legitimate business.

Deduct Losses/Expenses

One benefit for professional gamblers is being able to deduct legitimate gambling losses and related expenses from your taxable net income, just like running any other business. Potential deductions include:

Again, thorough records substantiating these expenses are required. A tax expert can ensure you maximize allowable deductions.

The key things are to keep an organized paper trail, use the proper tax forms for your gambling income sources, and take advantage of available deductions if you are truly a professional gambler. Staying compliant with the CRA rules is important to avoid penalties.

The Provincial Perspective: Tax Brackets and Rates Across Canada

The tax rates you pay on gambling income in Canada can vary depending on which province or territory you live in. This is because while the federal government sets overall laws around gambling, each province/territory has some flexibility in regulating specific gambling activities and setting their own personal income tax rates.

Every province has a progressive tax system with different "brackets" for taxing income, including gambling winnings. The more income you make, the higher the tax rate applied. However, the actual rates and income thresholds for each bracket differ across provinces.

For example, let's look at how interest/investment income from gambling winnings is taxed in a few different provinces:

                Alberta          Saskatchewan                      Quebec
First $142,292 is taxed at 10%                               First $49,720 is taxed at 10.5%              First $46,888 is taxed at 15%                    
Over $341,502 is taxed at 15% Higher amounts are taxed at higher rates The highest bracket of over $109,755 is taxed at 25.75%

As you can see, the income ranges for each tax bracket, as well as the rates themselves, are quite different depending on where you live.

In addition to these varying provincial tax rates, some provinces have unique policies around gambling taxation:

Withdrawing Your Casino Earnings: What You Need to Know

When you've racked up some wins at an online or land-based casino in Canada, there are a few common ways you can cash out and access your gambling profits:

  1. Bank Transfer: You can request to have your winnings directly transferred into your personal bank account. This is a secure method, but it may take a few business days for the funds to appear in your account.
  2. Check by Mail: The casino can mail you a check for the amount of your winnings. You'll then need to deposit the check at your bank, which can take some time to fully clear.
  3. E-Wallet (PayPal, Skrill, etc.): Using a digital e-wallet service like PayPal or Skrill is often one of the fastest payout options. Your funds are transferred to your e-wallet, allowing for quick access.
  4. Cash at Casino Cage: If playing at a physical casino location, you can simply go to the casino cage and cash out your chips/tickets for cash in person.

Withdrawal Times and Fees

To request a withdrawal, you'll need to verify your account, choose your payout method, enter the amount, and confirm the transaction. Most casinos allow withdrawals 24/7. Withdrawal speeds can vary from instant to several days, depending on the method used. The casino or payout service may also charge fees. Also, most casinos have maximum withdrawal limits per day/week.

E-wallets or cryptocurrencies are typically the fastest options for online winnings. However, bank transfers and checks, while slower, are often fee-free payout choices.

No matter which way you choose to cash out, be sure only to request a withdrawal from a legitimate, properly licensed casino operating legally in Canada. This ensures your funds are secure.

Planning Ahead: Consulting a Tax Lawyer for Gambling Earnings

The tax rules around gambling income in Canada can get quite complicated, especially for those earning significant profits or treating gambling as a business operation. It's often extremely helpful to consult with an experienced tax lawyer specializing in gambling and casino tax issues in these situations. Here are some key reasons why:

Get Personalized Tax Advice: A knowledgeable tax attorney can review your specific gambling activities and earnings to provide tailored advice on properly reporting income, maximizing deductions, choosing the right business structure, and overall tax planning strategies unique to your situation.

Ensure Full Compliance: Tax laws related to gambling have many nuances that can be difficult to interpret correctly on your own. A lawyer helps ensure you are fully compliant with all relevant federal and provincial regulations to avoid potential penalties or audits from the CRA.

Maximize Deductions: If you operate as a professional gambler, a tax lawyer can identify all the allowable deductions you may be able to claim to reduce your taxable net gambling income. This includes things like entry fees, travel expenses, coaching costs, and more.

Handle Complex Scenarios: There are added layers of complexity when it comes to issues like casino comps/bonuses, sports betting across borders, crypto gambling winnings, and more. A lawyer versed in gambling tax specifics can properly guide you through these grey areas.

Represent You With CRA: If you ever get audited or have other dealings with the Canada Revenue Agency related to your gambling income, having an experienced tax attorney represent and advocate for you is invaluable.

While a tax lawyer's services require fees, the money saved through proper tax planning and ensuring full compliance often makes it worthwhile, especially for serious or professional gamblers. Their expertise gives you peace of mind.