Recently updated on December 30th, 2022 at 03:54 pm
Is There Taxes on Winnings From Online Casinos in Canada?
Online casinos are still a bit of a taboo across the world, including Canada. A lot of people still don’t have enough trust in these establishments and generally prefer to make smaller deposits and get away with smaller withdrawals. Of course, we all want to win millions of dollars at the casinos and live out the rest of our days carefree. But when a player wins a significant amount of money at an online casino there’s always the issue of taxes at the back of his mind. A lot of players are in fact timid to make big withdrawals to their bank account from on online casino, in fear that their winnings will be taxed with a high percentage.
You better believe it; no player wants to pay taxes on their hard-won money at the casinos. The sweetest cash you can get your hands on is the one won at the casinos, so paying taxes on that is as close to blasphemy as you can get. But fear not in this article we will explain why you don’t need to pay taxes on your winnings in Canada and the rare cases when your winnings can be taxed. Let’s begin.
No Taxes For Casual Gamblers in Canada
That’s right if you’re a casual gambler you can rest assured that your casino winnings will not be taxed. This is due to the fact that gambling winnings are based on the principle of British law. It states that the winnings a player makes from placing bets on a game of chance are not to be taxed. Instead, the winnings that the bookmaker makes from receiving bets are taxed. So, because the bookmaker pays taxes on the money received from bettors, the money paid out in winnings to the bettors cannot be taxed. Otherwise, it would be a clear case of double taxation.
The main debate about this issue comes from the idea that the winnings a player makes from a casino cannot be considered a source of income. Instead, it is a matter of luck. As a casual player, you can make 10 deposits at 10 casinos and win at every single one. But this isn’t due to the fact that you are a good player, it’s just a matter of luck. You are playing games of chance where there is no skill factor involved or it’s not high enough to give you an edge over the game. So, after winning on 10 of your deposits you can end up on a losing streak where you lose every single one of your next 50 deposits.
If the winnings from online casinos were taxable, then the losses at the casinos would also need to be deductible. Chances are someone at the revenue office did the math and decided that it would be too much work to sort all of the deposits and withdrawals a player makes on a yearly level. After all the chances are against you while playing games of chance, so in the end, you can easily end up with a loss, despite having a few considerable withdrawals during the year.
Even if you have a system where you consistently win at the casinos and you make enough profit to make a good living you are still not obligated to pay taxes on your winnings. Even if you are gambling all the time and gambling becomes close to your profession to where you earn profits your winnings will not be taxed. This has been ruled upon in Canadian courts. For example, you bet on horse races where you have a system in place betting on the winners only with the best odds. You are still betting on luck, despite betting big amounts on the horse that is most likely to finish first. In the end it’s all down to luck as there is no sure thing in races or in gambling in general.
Still there are a few instances where your winnings can become taxable. Read on to see where.
If You’re a Pro Gambler You Need to Pay Taxes on Your Winnings
Usually, the only gamblers who need to file for and pay taxes are professional players. They fall in the category of poker and blackjack players, where the factor of luck goes head to head with the factor of skill. The concept behind this is that pro players make a living exclusively from gambling. Thus, there are considered to operate a freelance business of their own. This is why the winnings these players make are considered to be incomes from a private business, and they are subject to taxes.
But even for these types of player,s the process of taxation can be a slow one. This is mostly due to the fact that they can also report big losses on an annual level, which usually come from another type of business. They have to invest money in their gambling and that money has to come from somewhere. So, the entire process can be a slow one and, in many cases, even they can be exempt from paying taxes.
When Gambling Becomes a Business, Taxes Are a Must
That’s right when gambling activities become a business and gambling is the only source of income you have then the winnings are subject to taxes. This was ruled in the case of Lelanc v. Canada. This case refers to two brothers, Terry and Brian Leblanc.
They placed bets on government-run sports lotteries. Operating in the territory of Ontario and Quebec the brothers placed bets ranging from $10 to $13 million a year. From those bets, they made a pure annual profit of about $650,000, on a streak that lasted for 3 years. They were also known to employ over 15 people on their staff, whose job was to purchase the lottery tickets and handle them. Since the brothers turned their gambling habit into a business the winnings made from this endeavor were taxable.
- Canadian players don’t need to pay tax on offline and online casino winnings.
- However, professional gamblers, like professional poker players, need to file taxes.
- When gambling becomes a business and is your only source of income, you need to pay taxes.
We hope that we managed to clear up some matters when it comes to taxes on gambling winnings in the territory of Canada. If you’re a casual gambler you are not required to pay any taxes on your winnings, even if you hit a mega jackpot at the casino. But if you turn gambling into a business you may get a letter from the revenue office. In short, if you gamble for fun you are good to go and you won’t have to pay any taxes on your hard-earned winnings
Tax Resources and Info About Taxation and Gambling in Canada:
Canadian Government link:
Chapter discusses tax on strike pay, gambling winnings,
Canadians Gambling in U.S. and Tax Refund for Canadians
We are a team of online casino experts with over 20 years of experience. However, laws often change in Canada. And we are not accountants or lawyers. So if you are unsure if you should pay or get your taxes back, you should research, speak and contact a Canadian tax expert.