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Gambling Tax in Canada – In-Depth Guide

Can your winnings get taxable? Let's find out!

Gambling has always been thought by many people as a get-rich-quick scheme. However, while you can indeed win significant amounts, it is not easy to take home money! It can be frustrating. Not to mention, it can be a costly hobby, especially when you are irresponsible.

Among others, taxation is one of the most common concerns among gamblers. You must understand the basics of gambling winnings and taxes so that you won’t be going against the law. Otherwise, the failure to settle the necessary taxes can have legal consequences. It can also result in hefty penalties and can affect your reputation.

Are gambling winnings taxable in Canada? If you want to know the answer to this question, keep on reading!

So, What Do You Need to Know About Gambling Taxes in Canada?

There is one important thing that you need to know about taxes on gambling winnings in Canada – there’s no such thing! If you win in a land-based or online casino, you will not be subjected to taxation. From horse betting to the lottery, you can be confident that your winnings will be tax-free. It is not a constant source of income and not a form of employment, and hence, your winnings will be tax-free. This is provided that you are a casual player.There is one exception to the existing rule. Gambling is taxable in Canada only if you are a professional player. Whether online or in a land-based casino, as long as you are a professional gambler, you need to pay income tax. The tax is not based on your every winning. Rather, this will depend on the income that you will be declaring, which is subjected to eligible deductions.

Why are Casino Winnings Not Taxed?

Casino winnings are not taxable because of the assertion that they are not a result of an expectation but luck. This principle was based on the British Common Law. It can be found on the Income Tax Act under paragraph 40(2) (f). As long as the profits are not business-related, these winnings are non-taxable. Again, if you are a professional player, as noted above, it is a different story since it is assumed that gambling is your main source of income.

How Does Gambling Work with Income Tax?

Provided that you are a professional player, then you should be concerned about gambling taxes Canada. It is a part of your income tax, which you need to settle  based on a pre-determined schedule.

The Canadian Revenue Agency is the branch of the government responsible for tax collection. If you are a professional player, your winnings will be classified as your income, and hence, you will need to pay taxes. You will be taxed similar to other jobs.

One of the good things about paying taxes as a professional gambler is that the government allows you to deduct your losses, as well as your expenses.

The specific amount that you will have to pay will be based on the total income or winnings less all legitimate expenses. This can range from 15% to 33% depending on the income.

Based on the Income Tax Act, there is no distinction between online and offline income sources of professional gamblers, and hence, the assertion is that the computations are the same.

Another important thing to note is that the rule on income tax from gambling will apply anywhere you are in Canada. While different regions and cities have their respective gambling laws, when it comes to taxation, there is a whole-of-nation approach. Hence, regardless of where you are, the same tax rules will apply.

What About When Taxation When Playing in Another Country?

If you are a Canadian gambling in another country, then the rules of that country will apply. In the United States, for instance, you will be paying up to 30% withholding tax for your winnings. This is a big amount! However, you can also declare your losses and expenses, which will let you get back what you have paid in taxes.

What are the Penalties for Not Paying Taxes?

The failure to settle offline and online gambling taxes will have corresponding consequences. The penalties for tax evasion will depend on the extent of the offense. The Section 238 of the Income Tax Act specifies the penalties for the failure to settle income taxes, including for professional gamblers. The fine can range from $1,000 to $25,000 and can also include up to one year in prison.

To prevent the penalties, make sure to pay your taxes on time. Hire taxation experts to be familiar with the computation and to avoid going against the law. The expert can also help you find a way to make the taxes less of a burden.

Final Verdict

As noted above, gambling winnings are not taxable. It also follows that there are no gambling losses taxes! Regardless if you are playing in an online or land-based casino, you can expect that your winnings will be tax-exempt. Even lottery winnings, big or small, are tax-free! If you are a professional gambler, however, it is a different story. This means that gambling is your way of living, which is like a business, and hence, you need to pay the right taxes.

Now that you know that gambling winnings are tax-free, it’s time to give it a try! You do not need to leave your home! Visit Digibet today and enjoy their great selection of exciting games!

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