Many Canadians enjoy visiting casinos, playing poker, betting on sports, and buying lottery tickets. A common question people ask is whether gambling winnings are taxed in Canada. In some countries, you must pay taxes on casino earnings, but the situation is different in Canada. This guide explains how winnings are taxed in the country, as well as what happens to deposits and withdrawals, international earnings, and more. Read on to learn all the details.
Provincial Differences in Gambling Taxation
Canada’s tax system is at the federal and provincial levels. However, the rules for gambling are mostly the same across the country. The Canada Revenue Agency (CRA) doesn’t need most players to pay taxes on winnings. No matter the province, you’re safe as long as you’re not a professional gambler.
For example, lottery winnings are not subject to taxes. In fact, in 2017, a Canadian lottery winner took home a $60 million prize from Lotto Max, which set a record for the largest jackpot in Ontario. Despite the enormous win, this payout was not subject to taxes, as lottery winnings in Canada are not taxed.
“As one of the largest lottery wins in Ontario’s history, this prize shows that Canadians can keep their full winnings without worrying about taxes,” said a representative from the Canada Revenue Agency (CRA).
The major difference is in how the provinces regulate gambling businesses. Each province controls its casinos, online betting sites, and lottery systems. For instance, Ontario launched its regulated online gaming market in 2022. This means online casinos and sportsbooks must pay taxes on their earnings. The taxes only apply to the gambling companies, though, not the players.
Professional Gamblers and Taxation
Canada’s tax-free gambling rules have a major exception. Once you are a professional gambler, the CRA sees betting as your job. Your winnings therefore count as taxable income.
In 2020, Canadian professional poker player Jonathan Duhamel, who won $18 million at the World Series of Poker in 2010, revealed that his gambling earnings are his primary source of income. Since his winnings are considered business income, they are subject to taxation.
“If you treat gambling like a business, then your winnings are taxed just like any other business revenue,” said a financial expert from CRA.
To decide if someone is a professional gambler, the CRA looks at different factors. They check how often a person gambles, how skilled they are, and if gaming is their main income. Hence, a poker player that enters tournaments often, studies strategies, and treats gambling like a business is considered a professional. Such a person must report winnings as income and pay taxes. However, professional gamblers are also allowed to deduct travel costs, tournament entry fees, and other expenses.
Even if you’re not a professional, it’s good to monitor your wins and losses. The CRA sometimes investigates high-stakes gamblers. It’s to ensure no one makes a living from the gambling industry without reporting their earnings. Therefore, the records you keep will come in handy whenever your gambling activity is questioned.
Gambling Deposits and Withdrawals
Let’s put winnings and how are bonuses taxed in Canada aside. Many casino players also wonder if they must pay taxes on deposits or withdrawals. The answer is no. But they should still know about some financial rules.
For one, online betting sites must follow strict anti-money laundering (AML) laws. Say a player deposits or withdraws a large amount (especially over $10,000). The online casino is expected to report such to financial authorities. This doesn’t mean the player has to pay taxes. But their transactions may be monitored to rule out illegal activities.
Here are a few things that financial institutions may look out for regarding gambling-related transactions:
- Large deposits or withdrawals: Transactions above a certain threshold (e.g., $10,000) could attract attention.
- Source of funds: Banks may request explanations of where the money is coming from to ensure it isn’t tied to illegal activities, such as money laundering.
- Frequent large transactions: If someone frequently moves large sums from gambling sites, it may raise red flags for financial institutions.
In 2019, a Canadian bank flagged a series of large deposits amounting to over $300,000 from international online casinos. While the player did not need to pay taxes on these funds, the bank requested an explanation of the source of the money to ensure no illegal activity, such as money laundering, was involved.
“We didn’t pay taxes on the winnings, but we were asked to confirm that the source of the funds was legal,” said the player. Banks and financial institutions closely monitor large gambling-related transactions to prevent money laundering.
Also, most players prefer online casinos with $10 minimum deposit since they reduce financial risk. But this doesn’t really change anything. Casual players in Canada don’t have to pay taxes on their payouts, no matter how small or large their deposit is. A player who wins big or is considered a professional gambler may need to pay taxes, though. For those who prefer to minimize their risk even further, an online casino with low minimum deposit is a great way to enjoy gaming without a large financial commitment.
Players should be aware of how they withdraw their winnings, too. Online casinos offer many payment options, like bank transfers, e-wallets, cryptocurrencies, etc. While these transactions are not taxed, frequent or large withdrawals could draw attention from financial institutions. When a player unusually earns a lot from gambling, the bank will ask questions to know where the money came from. That’s another reason to always keep clear records of earnings and transactions.
International Online Gambling Winnings
Many Canadian players prefer to wager on international sites because they usually offer more games, bigger payouts, and attractive bonuses. This is one of the reasons why many gamblers sign up with Caxino Casino in Canada, because it offers a wide range of games and bonuses suitable for casual players.
Yet, when betting for fun in Canada, paying taxes on your gambling income isn’t needed. But if you use sites from other countries, you should know the rules. Some foreign casinos may take a part of your winnings as tax or charge extra fees for significant withdrawals. Canada does not tax these winnings. But banks may ask where the money came from after a large deposit.
In 2021, a Canadian player who won over $1 million on an international online casino site faced extra scrutiny from financial institutions. Although the winnings were not subject to Canadian taxes, the player was asked to provide information regarding the source of the money.
“I won big on an international site, and while I didn’t have to pay taxes, I had to explain where the money came from because the amount was significant,” explained the Canadian player.
When you win huge amounts often, Canadian tax officials may notice. Likewise, if gambling is your main source of income, the CRA will classify it as a business. In that case, you would need to pay taxes. To avoid problems, check the rules of the gambling site, your payment method, and any tax rules that apply.
Reporting Gambling Earnings
It isn’t necessary for most Canadian players to report their payouts. They are seen as lucky money, not regular income. But in some cases, keeping records and reporting your earnings help a lot.
If gambling is your job, you must report your winnings as business income. The good part is that you can also deduct costs like travel, tournament fees, and training. You need to keep records of how much you win and lose, though, because the CRA may ask for proof.
Another situation where reporting may be needed is when large amounts of money are involved. Banks and financial institutions keep an eye on big gambling deposits and withdrawals. This is to prevent illegal activities like money laundering. If someone frequently moves large amounts from gambling sites to their bank account, they might be asked to explain where the money came from. This doesn’t mean you will pay taxes. But if you can’t provide proper documents, your account could be frozen.
Some Canadian gamblers report their earnings even when they don’t have to. This can help when applying for loans or mortgages. Banks usually look at income history. And if they see huge deposits with no explanation, they might not approve the loan.
Conclusion
Many people wonder if there are lottery winnings taxed in Canada. And as we have already established, it isn’t so with normal gambling payouts. When playing for fun, you keep all your money. It doesn’t even matter whether you win at a local casino or on an international site. But if gambling is your job, you must report your winnings and pay taxes.
Also, banks do not tax deposits or withdrawals. But they may check large amounts of money to prevent fraud. And if you use sites from other countries, always check the withdrawal rules. Some countries may have their own gambling tax laws that could affect your winnings.
By understanding Canada’s gambling tax laws and how banks view gaming transactions, you can avoid problems and focus on enjoying your play.
