How Gambling Tax Works in Canada
Gambling can be fun, entertaining, and sometimes rewarding if you manage to win. In most cases, Canadians do not have to pay tax on any gambling winnings. But there are caveats.
Whether you need to pay tax on your wins from gambling depends on numerous factors, including the type of gambling you take part in and the games you play. Even if you don’t need to pay tax on the winnings themselves, you do have to pay tax on any interest you accrue.
With many different possibilities, we’ve created this guide explaining the many different scenarios. This should help you to figure out if tax is due on any of your wins from gambling.
Are gambling winnings taxable in Canada?
No tax is applied to any gambling winnings in Canada for players not considered professional gamblers. This is the case for the vast majority of people.
This ruling applies to all provinces and includes all forms of gambling, such as at online casinos in Canada or betting in person.
You are not a professional gambler if you occasionally win money while playing, or if you happen to have won more than you’ve lost at a specific casino or in general. Instead, your winnings would have to be considered a source of income. Let’s explain.
Windfall
For amateur gamblers, winnings are classed as a non-taxable windfall earning. This means that you did not expect to profit from your betting.
It’s likely that you also lose a lot and simply gamble for fun or as a hobby with little or no skill involved. In cases like this, something that the majority of Canadian gamblers fall under, you won’t have to pay any taxes.
While the Canadian government doesn’t think it fair to tax amateur players or those who gamble solely for fun, it may apply if the winnings are utilised elsewhere. For example, you will need to pay tax on any interest accrued from gambling winnings – such as from shares or a savings account. Therefore, we still advise you to keep records of your gambling habits just in case.
Profit-focused
However, for professional gamblers, any winnings are typically listed as taxable business income. This is because professionals expect to win and make a profit in the long run based on their skill, objectives and overall consistency with winning.
Professionals also tend not to make any income from other means and, as such, will be taxed on any winnings they have earned through gambling.
How type of gambling can affect tax
The type of game you play or bets you make can have a big impact in determining your gambling tax status. Specifically, if you gamble on games or events that are purely down to chance or if there’s a bit of skill and knowledge involved.
It’s important to remember that playing skill-based games doesn’t mean you’re automatically deemed a professional. Far from it. You would also have to satisfy other criteria too. But here’s how it can have an affect.
Games of chance
Luck-based games are those where the skill of the player does not factor into the outcome at all. These types of games include:
- Slots
- Lotteries
- Roulette
Players are not able to influence the final outcome. Instead, you just bet into the round and hope for the best.
Skill-based games
In skill-based games, your knowledge and ability can have an impact on the final outcome. One of the best examples is poker which is heavily dependent on each player’s decision making. However, the definition can also extend to games or bets like:
- Blackjack
- Sports betting
- Craps
These types of games also require a level of skill, though they can still be classified as both windfall or income depending on each case. As such, these types of games can be a little tricky when it comes to determining whether tax is due or not. This is why strict record-keeping is very handy just in case.
Are gambling losses tax deductible?
You cannot deduct gambling losses from your taxes if you’re an amateur gambler – like most people are. That’s because you won’t be paying tax on any earnings.
However, professional gamblers can deduct gambling losses from their tax in Canada. Under the Income Tax Act, losses can be written off – although the criteria are a little muddy which is where legal tax advice can be very handy.
There are more tax benefits for professionals too. For instance, if you are approached to perform as a means of entertainment with your gambling skill in mind, then you may be eligible for a tax deduction when filing your taxes. If you’re operating as an independent contractor, tournament fees, transportation or hotel expenses may also be deductible.
How to declare your taxable winnings
Use the tax forms T3, T5 and T5013 to declare your gambling winnings. If you do not have an income of more than $50 from the interest of your gambling winnings, then you won’t get a T5 form. However, you always need to declare any winnings to avoid penalties. Make sure such earnings are included in your personal income tax.
With all of this in mind, again, it’s essential to record and track any gambling winnings. Additionally, you should seek professional legal advice if you are not sure. It’s always better to be safe than sorry when it comes to taxes and potential fines.
Gambling taxes per province
Even though gambling tax in Canada is determined by the federal government, any tax you do have to pay is determined by each province. This applies to professional gamblers and any interest accrued from gambling winnings for amateur gamblers.
Here’s a quick breakdown for each province:
- Ontario: 5.05% to13.16% depending on the income
- Quebec: 14% of the initial $49,264 income
- British Columbia: Seven tax brackets starting at 5.06% and reaching 20.50%
- Alberta: 10% on the first $142,292,
- Across Calgary and other parts of the province, as high as 15% on income exceeding $341,502
- Manitoba: Three tax brackets with rates starting at 10.80% to 17.4%
- Saskatchewan: Starts at 10.5% of the initial $49,720
- Nova Scotia: Between 8.79% and 21% depending on income
- New Brunswick: Income-dependant and range from 9.4% to 19.5%
- Prince Edward Island: Three brackets from 9.8% to 16.7%
- Newfoundland and Labrador: Ranges from 8.7% to 21.8% depending on income
Taxes on gambling abroad
While there are many land-based casinos in the country, many Canadians are playing online too. In Ontario, everything is fully regulated so you will always be playing at a site that’s registered with the authorities.
However, no other province has yet regulated online gambling and this has seen many offshore online casinos accepting players from Canada. For example, MGA casinos that have a license from Malta are popular with Canadian players.
Tax at offshore online casinos is calculated exactly the same way – by determining if you’re an amateur or professional gambler.
While there are no taxes from Canada, it’s important to consider any taxes in the location being played. Typically, these are collected at the source but it’s another reason to keep a detailed record of all spending and earnings.
US gambling
Gambling in the US is slightly different. Winnings in the US do not need to be reported and are not considered taxable income in Canada. Many Canadians go across the border and can freely gamble in the casinos there.
However, remember that US land-based casinos may implement local tax on any winnings made. This will be done immediately when cashing out.