Jan 03, 2020 The following rules apply to casual gamblers who aren't in the trade or business of gambling. Gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos.
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
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Winnings from a Canadian lottery such Lotto Max or 649 are considered to be windfalls, and Windfalls are not subject to tax.
Even winnings from a sweepstakes 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, thought the Canada Revenue Agency (CRA) does not tax the winnings themselves, you may need to pay taxes on any income your money generates. So, if you put your lottery prize in the bank, any interest your money makes will be taxable. If you buy stocks or start a new business with your winnings, any profits you make may be taxable.
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.
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. Your employer will deduct income tax, Canada Pension Plan (CCP) and in some cases, Employment Insurance (EI) premiums on this type of award and the taxable benefit will be listen in Box 40 on your T4.
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.
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 to 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.
A poker run is a raffle where tickets or tally sheets are sold and prizes are awarded to winners based on their hand of playing cards (“alternative” drawing). Alternative Drawing v. Standard Drawing In poker runs, winners are determined by their hand of cards; this is an “alternative” drawing. A “standard” drawing is pulling tickets out of a hat. The participants travel to a number of locations, usually bars, collecting a single playing card at each establishment. At the end of the run, the player(s) with the best hand wins a prize. Traditional “Poker runs” are illegal because it’s gambling. Gambling involves three elements that all must be present. Is a poker run gambling.
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.
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Online poker may not be quite as popular as it was during its heyday back in the mid-2000s, but it’s still a fun way to pass some time and make a little cash along the way. It also just so happens that if you’re in Canada, you have no shortage of awesome online poker options at your disposal.
Canadian players are afforded access to the best online poker sites the world has to offer. It’s not legal to play poker over the internet everywhere, but it isn’t illegal to do so if you happen to be in the Great White North.
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The best online poker sites for Canadian players are listed below:
- PokerStars
- Party Poker
Who Are the Biggest Names in the Industry?
If you’re looking for the best bang for your buck, PokerStars is probably your best bet. You’ve probably heard of them considering they were at the forefront of the aforementioned online poker boom of the last decade. PokerStars remains the world’s biggest online poker room to this day, and their prize pools are unmatched elsewhere in the industry.
PokerStars has all sorts of game types. New players in Canada can receive a deposit bonus of up to 100% of their initial deposit up to $600. New sign-ups will also receive free entry into a $2,500 free roll consisting exclusively of new players. So, you’re not having to go up against the best players in the world right off the bat, which is good if you’re an inexperienced poker player looking to get in on the action.
While PokerStars is undoubtedly the biggest name in the industry, new players may have a better time starting out at 888poker. 888poker advertises itself to more casual and recreational players. Their prize pools aren’t as huge as PokerStars’, which is why some of the sharks stay away. As a result, you’re able to test your skills against other players of a more comparable talent and experience level.
888poker also offers a 100% deposit bonus for first-time deposits up to $400. Online poker double or nothing strategy. Best of all, they’ll give you an $88 bonus even without a deposit. They won’t just credit your account with $88, however. Instead, most of the money comes to you via free tournament entries, and each reward comes with every 250 bonus points you rack up as a regular player.
Both PokerStars and 888poker have been around for years, so it’s easy to see why both have such a favorable reputation in the industry.
Are Poker Winnings Taxable in Canada?
One major reason Canada is among the best countries in the world to play online poker is that whatever winnings you earn are not taxable. That’s right. Because poker winnings (and winnings from any other form of gambling) are not considered to be income, the Canadian government won’t ask you for a chunk of your winnings. The Canadian lottery doesn’t tax winners either.
So, if you’re a casual player, rejoice! However, if you are good enough to play online poker as a job, it’s a different story. If you are a pro poker player, your winnings are taxable as a business income. You obviously want to follow the law if you’re playing poker online, but this affects a relatively small percentage of poker players in Canada.
The tax-free earnings are another reason Canada is a perfect place to start playing online poker for casual and new players. You can hone your skills while building your bankroll without having to worry about losing some of your winnings to those pesky tax collectors.
How Do I Deposit or Withdraw?
Nowadays, it’s extremely easy to deposit or withdraw money from an online poker site in Canada. The best places to play offer no shortage of options either. Depositing via a credit or debit card is the most popular way to do so, but the best sites these days also accept Bitcoin and other forms of cryptocurrency, if that’s your thing.
Arguably the easiest way to deposit cash is by using an online payment system such as Skrill. The transaction fees are low, and there are fewer red flags than may arise with some credit card companies that may be reluctant to process deposits for gambling purposes.
Withdrawing money is also easier in Canada than it is in a country like the United States. In fact, the laws in Canada are such that you can actually just withdraw through your bank. US banks typically reject transfers from poker and gambling sites, but most Canadian banks will accept a simple wire transfer.
Are Canadian Lottery Winnings Taxable
Best Online Poker Sites in Canada
As mentioned in the open, Bodog, PokerStars, and 888poker are considered to be the very best poker rooms for Canadian players. All three gambling sites have excellent reputations thanks to years and years of quality customer service and a number of different offerings.
Most importantly, these sites are safe. While there were some sketchy and untrustworthy sites during the oft-mentioned boom of the mid-2000s, most sites operating today are 100% safe for online players. Sticking with the big names is probably the safest course of action, but reading the fine print and making sure your site has the proper operating licensing is a good way to figure out whether a site is safe for play.
Federal Tax On Gambling Winning
You can try your hand at a government-operated poker site if you’re nervous about trusting some of the others out there, but Bodog, PokerStars, and 888poker are safe, convenient, and fun sites at which to play poker regardless of your experience level.
Playing online poker in Canada has all sorts of benefits, so what are you waiting for? Sign up and start playing today!