If you’re a resident of Canada, you don’t have to report any of those gambling winnings in Canada. You are also not eligible to claim a foreign tax credit on your tax return in Canada because you did not report any income outside the country. The only time you need to report income earned from gambling is if you’re running a gambling. In cases of sports betting, poker, or casino games and slots, winnings are also not liable for taxation – unless you are a professional gambler (as defined by paragraph 40 (2) (f) of the Income Tax Act,). If you are, you must declare gambling winnings when you file your taxes and will be charged 26%.
- Are Us Gambling Winnings Taxable In Canada
- Are Gambling Winnings Taxed In Canada Today
- Are Gambling Winnings Taxable In Canada
- Are Gambling Winnings Taxed In Canada Now
US offers a promising gambling experience but comes with a price, while Canada offers less but doesn’t take away winnings.
Gambling has been a popular activity for centuries across the globe. However, since the modernization of society, some nations have adopted certain laws pertaining to gambling.
The US imposes certain restrictions on players, which effectively dampens the overall experience for regular gamblers. Even though one may be a winner, he is still a little bit of a loser, as he stands to give away a portion of his winnings to the tax man.
Canadian players on the other hand, can play all they want and remain complete possession of their gaming earnings, as taxes do not apply to prize money earned through games of chance.
Gambling in the US
Gambling in the US is generally viewed in the negative light, as many Americans will agree with one another that participating in such an activity is unsavory.
Nevertheless, there are plenty of people in the US that like to gamble, regardless of what the contemporary perception is. However, when a gambler goes into a gambling institution and manages to win some money, he is liable to pay taxes on his winnings, as dictated by the US gambling laws.
• Winnings in US taxed, but experience is worth it
• Winnings in Canada not taxed, but overall experience is lower
• Non-residents of US are sometimes exempt from paying tax
Although there is a tax, one can view it as an expense for receiving some premium benefits. It is an unwritten law that every serious gambler should visit and, more importantly, partake in games in the world’s “Gambling Mecca” known as Las Vegas.
Casinos and institutions alike are obliged to charge players 30 percent or more on their winnings. Sometimes the percentages may exceed 30 percent, depending on a number of factors.
In addition, according to the Internal Revenue Service (IRS), virtually all gambling winnings are taxable. Lotteries, raffles, casinos, mobile betting firms, horse and dog races and any other kinds of gambling activities fall under taxation obligations, if one is fortunate enough to win something.
Players must maintain an accurate record of all their winnings and losses throughout the year, by filling the appropriate forms. Otherwise they may be liable to certain penalties, if they are found of breaching specific regulations.
Gambling in Canada
Whether one is betting on sports events, casino games or other forms of gambling, winnings are not taxed by the Canadian law.
Winnings that are obtained from online gambling sites in Canada are never taxed. However, when it comes to poker, there is an exception. If one is professional poker player, one will have to report his prize money to the proper authorities.
Games of chance are not viewed as proper means to make an income, while poker holds a certain view that skill is more involved in the concept of the game, than chance or luck. But then again, proving that one is a pro poker player is quite tricky, so the law is murky when it comes to this.
Non-Canadian residents are also not liable to pay taxes on their winnings, and are entitled to keep their prize money form gambling activities. However, US players that are looking to cross the border to gamble, in hopes to reserve the right to keep the winnings would be wrong.
US residents have it hard, as they have to pay tax on winnings, regardless where they won the prize money. Therefore, even playing in Canada, US players will still have to give away part of their gambling income to the IRS.
Exceptions to the tax law
When non-US residents decide to visit the States and try their luck in the gaming world, some players are destined to win money, and for that, special rules may apply for them at certain times.
If an alien resident or foreigner were to have success in a casino in the US, then his winnings would automatically be taxed by the IRS. However, there are ways to get the money back, but it involves going through a highly complex process that requires additional time and money.
Hiring or consulting with an expert in the field that knows the ins and outs of the matter is advisable, but then again these individuals or firms impose a percentage on getting back one’s winnings for them.
Additionally, one has to first obtain a so-called non-resident ITIN (Individual Taxpayer Identification Number), with which one can start the procedure and attempt to get the winnings back.
Not only that, but the IRS does not allow any individual to initiate the move without an authorized Certifying Acceptance Agent, who is tasked with handling all the business on a player’s behalf.
Therefore, the entire trouble is not worth the hassle concerned with US gambling laws, unless there are millions involved. It is advisable to just relinquish the efforts and accept the 70% of the winnings.
When it comes down to it, gambling the US may very well prove to be an unforgettable gambling experience, however it comes with a price for providing the premium service.
While Canada should be viewed as the long-term gambling solution. Players are allowed to retain all of their winnings, which means that each time one wins he is able to keep 30% or more, than he would have if he had gambled in the US.
However, if a non-Us resident has the means and the patience to follow through with the procedure of getting his money back, then playing in the US would be a win-win.
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.
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 Gambling Winnings Taxable In Canada
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…
Are Gambling Winnings Taxed In Canada Today
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.
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.
Are Gambling Winnings Taxable In Canada
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.