Picture this: you’re on a roll with your favourite game of chance…
Maybe your sports bet just came through with Mise-o-jeu – Maybe you got lucky playing an online slot at PlayOJO – Maybe you hit a hot streak in roulette at Casino Niagara – Maybe your chips are steadily growing from a game of poker or blackjack at River Rock Casino Resort…
Whatever you’re playing and wherever you’re playing it, the money’s coming in, the excitement is growing, and you’re ready to cashout.
Then it suddenly occurs to you, “…wait, will I have to pay taxes on these winnings?”
Chances are, if you’re an average Canadian gambler (that’s most of us by the way), your winnings likely won’t be taxed by the CRA (Canada Revenue Agency).
But, since we’re talking about taxes, there’s always exceptions of course. Wondering if your winnings might be an exception? Here’s what to know.
Casual gamblers are typically off the hook
For casual or recreational gamblers (those who play every so often), any profit made from gambling is consider windfalls— A.K.A. pure luck. In other words, it’s not considered taxable income because gambling is inherently unpredictable.
So, whether you hit a slot jackpot, win big at poker, or win a multi-million lotto prize, you get to keep everything you win. The CRA does not require most Canadians to report their prize winnings – regardless of the amount – as income.
In short – if you gamble from time to time, and you strike it lucky – you don’t pay taxes on gambling prize money in Canada.
Professional gamblers aren’t so lucky
Casual gambling aside, the CRA does expect Canadians to report gambling profits if that prize money is considered:
- Income from employment (e.g. a poker player who gamble’s professionally for a living, etc.)
- A business or property (e.g., an owner of a gambling establishment)
- A prize for achievement (e.g., recognition for a special award)
Now you might be thinking, “how would the CRA know the difference between a casual gambler and a professional one?” The answer is…
There is no “one-size-fits-all” rule
The CRA will consider several factors when deciding whether your gambling winnings should be taxed. Some of these may include:
- How often and how long you engage in gambling activity
- If you play games of skill (e.g., poker) vs. games of luck (e.g., slots)
- Whether gambling is your main source of income
- If you treat gambling as a job
If you meet any of the above criteria the CRA may deem you to be a professional gambler and you will be expected to pay taxes on your profits, just as any business would.
Winnings may be tax-free; investment earnings are not
If you decide to invest any of your winnings (even if you’re a casual gambler), anything you earn from investing that money is taxable and must be reported on a return. This includes (and is not limited to) investing in:
- Stocks
- Real estate
- A business
Whether your return from the investment is in the form of interest, rental income, or capital gains, you’ll owe taxes on it.
As such, if you win lots of money, it’s a good idea to talk to a financial advisor to find out how to invest it and gift it wisely.
What about Quebec?
If you live in Quebec, it’s pretty much the same rules as the rest of Canada. Taxing gambling wins largely depends on the nature of the activity.
If it’s recreational, in most cases it’s not taxed. If it’s considered business activity or as a main source of income, winnings are taxed.
Canada Gambling Tax – Key Takeaways
Most Canadians who engage in recreational gambling activity don’t have to worry about their winnings being taxed, regardless of the type of gambling they enjoy.
Canadians who are deemed professional gamblers by the CRA (e.g., it’s a job, a main source of income, etc.), are required to pay taxes on their winnings just as any business is required to pay taxes on their profits.
If any Canadian invests their winnings, whatever they earn from this investment is taxable.
Bottom line: Gambling prize winnings are un-taxed for most Canadians, but if you’re ever unsure – no matter where you live in Canada – play it safe and don’t guess. Keep records of your winnings and talk to a tax advisor.