Are Us Casino Winnings Taxable In Canada
In Canada, the laws pertaining to the ownership of online casinos are quite strict. Namely, only the government is allowed to own an online casino that has its headquarters within Canadian borders. For others, though, it is illegal. Nevertheless, a way to bypass these laws has been found. Many online casino owners from this country decided to operate from other jurisdictions where online gambling is legal. From there, they offer their services to Canadian players.
Any gambling winnings, which include foreign lottery prizes, are reportable on your tax return as well. Reporting your lottery prize doesn't necessarily mean you have to pay tax on it, but if you do, it's subject to the same graduated tax rates that apply to your other income. The US Internal Revenue Service (IRS) has a different approach to your lottery winnings than the CRA, and considers all winnings to be taxable. As a Canadian winning a US lottery you would still be responsible for American tax obligations. With a lottery winning you would have to file a US tax return. Also if you hit the jackpot at a casino, a.
The laws pertaining to the players themselves, on the other hand, are rather relaxed. In fact, gamblers from Canada are allowed to play in any online casino they like, regardless of its location. Also, you will not be required to pay any taxes for your winnings most of the time, unlike in the US, where all winnings of $1200 or more are subject to a 30% tax.
There are some situations in which winnings have to be taxed, though, and they will be discussed in this article.
Do I Need to Pay Taxes on My Winnings?
Most Canadian gamblers are not expected to pay any income tax on their winnings, since these prizes are not really considered to be a viable source of income. The government simply does not see this kind of taxing as just or fair, as the majority of Canadian players do not make a living this way and gambling is not their career.
Nevertheless, there are gambling professionals who earn most of their money from games of chance, which is why they are expected to pay taxes on their prizes. For example, everyone who runs a gambling business needs to declare their profit from it on a tax form. Moreover, according to the Canadian Income Tax Act, a person is seen as a professional gambler if gambling is their exclusive source of income, or if he/she uses a specific set of skills to make a long-term profit. This is why poker players are more likely to be seen as professionals than others, as poker relies on skills just as much as it relies on luck, if not more.
As a result, those players who do not fit any of these criteria are seen as non-professionals, regardless of how much time they spend playing or how much money they make while gambling. Even if someone is an avid gambler, they will not be seen as a pro, unless they make their living doing this exclusively.
This law pertains to all the popular casino games, such as slots, blackjack, poker, and roulette, among others, and it is used to govern both online and offline forms of gambling.
How Should Professionals Calculate Their Taxes?
Professional gamblers are considered to be running their own freelance business, which is why they need to file taxes on their prize money. The winnings are taxed just like any other kind of income, while all the losses are seen as expenses and are, thus, deductible.
However, bear in mind that in each of the ten provinces and three territories, there are different income tax rates, which is why you have to be careful when filing your taxes.
For example, in Quebec, tax rates are higher than anywhere else in Canada, which is why the first C$43,790 of taxable income is subject to a 15% tax in this province. For the next C$43,785, an additional 20% tax is applied. The tax rate for the next C$18,980 is 24%, and for any taxable income of C$106,555 or more, a 25.75% tax will have to be paid.
On the other hand, you will find the lowest income tax in Nunavut, where 4% is paid on the first C$45,414, 7% on the next C$45,415, and 9% on the following C$56,838. Every amount of C$147,667 will be subject to 11.5% tax.
Remember, these rules only apply to professional gamblers, as defined in the previous paragraph. Non-professional players are exempt from paying taxes for their prizes and winnings.
Are the Laws the Same in Every Part of Canada?
Canadian provinces and territories are considered to be self-governing entities. That is why each of them has been allowed to pass its own acts regarding gambling. Basically, your location in Canada determines what kind of gambling you will be allowed to participate in legally and how old you have to be in order to take part in these activities.
However, in each of the provinces, you will be seen as a professional if you fulfill the criteria mentioned above. Also, even though tax rates differ from province to province, the fact that you have to pay taxes if you are a professional player remains.
Final Thoughts
In Canada, online gamblers who make a living playing games of chance are perceived as professionals, which is why their winnings are seen as income and are, therefore, taxable. The tax rates will depend on the players’ location, as they differ in each of the provinces and territories. However, those who have another job or career will not be considered professionals and will not be expected to pay anything.
Still, this information is subject to change. If there are any doubts, make sure to contact an accountant or a tax lawyer, as they could provide more details regarding taxes and online casino winnings for each of the provinces and territories in Canada.
Everyone dreams of winning the lottery or hitting the jackpot at the casino. But you may wonder how much tax you’ll pay on all that money. The good news is that in Canada, your winnings are usually tax-free!
Lotteries
Winnings from a Canadian lottery such as Lotto Max or 649 are considered to be windfalls, and windfalls are not subject to tax.
Even winnings from a sweepstake or lottery sponsored by a charitable organization are generally tax-free. Everything from your local hockey team’s 50/50 draw to the Big Brothers/Big Sisters travel lotto vouchers are included in the windfall category and therefore not subject to tax.
However, though the Canada Revenue Agency (CRA) does not tax the winnings themselves, you may need to pay taxes on any income that money generates if you invest in a non-registered investment or account.
For example:
- If you put your lottery prize in the bank, any interest earned on that account will be taxable.
- If you invest some of your winnings in stocks or mutual funds, any dividends earned on the investments will be taxable. As will any Capital Gains you may make when you dispose of or sell the investments.
For this reason, if you do plan on investing your winnings, you may want to consider investing in your Tax Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) if you have the available contribution room. This TurboTax article explains further Paying Taxes on Investments.
Are Us Casino Winnings Taxable In Canada Tax
Casinos
If you score big from a Canadian casino, your winnings will be treated the same as other lotteries and usually remain tax-free.
However, over the past few years, the CRA has begun looking for professional gamblers, classifying their “winnings” as business income and therefore taxable like any other business income. At the same time, this also means professional gamblers can claim business expenses. In theory, pro gamblers should also be able to claim losses as a business loss, but the CRA usually doesn’t allow it.
Are Us Casino Winnings Taxable In Canada Now
Workplace Contests
Prizes won from your place of employment aren’t always tax-free.
Cash awards or near-cash awards such as gift cards, are almost always considered to be taxable employment benefits. This means the award will be considered as part of your income and should be reported on your T4- Statement of Remuneration Paid in Box 40. Your employer will deduct income tax, Canada Pension Plan (CCP) and in some cases, Employment Insurance (EI) premiums on this type of award or prize.
What Happens in Vegas Stays in Vegas…
The rules discussed above only apply to winnings from Canadian sources. If you like to gamble or play lotteries that are based in the US, their government has different rules that would apply even if you are not a US citizen.
Are Us Casino Winnings Taxable In Canada Due
The US Internal Revenue Service (IRS) considers all winnings to be taxable. If you win a US lottery, you would have to file a US tax return and pay taxes on the prize. If you hit the jackpot at a casino, a good chunk of those winnings will be withheld by the casino to ensure your tax obligations are met before you even leave the country.
Even if you are gambling online from your own home, if you play on a US online poker site, any winnings or prize money will be considered to be American income and taxed accordingly.
With more than 20 years’ experience helping Canadians file their taxes confidently and get all the money they deserve, TurboTax products, including TurboTax Free, are available at www.turbotax.ca.