If you are wondering whether you should pay taxes on your gambling wins as a Canadian gambler, you are not alone. The conversation is a big deal in online gambling, and the answer is a little more complex than a simple yes or no.
However, whether you are new or experienced in online gambling, an answer is important to avoid any surprises. This article aims to clarify tax implications for online gamblers. Here, we offer a concise overview of taxes for casual and professional players.
Gambling Taxes on Casual and Professional Canadian Gamblers
To understand gambling taxes, there are two lenses to look at it: casual and professional gambling. The rules are a bit different for both. Here is what we mean:
1. Casual Gamblers: No Tax on Gambling Wins
Gambling is a casual form of entertainment for many Canadians. It can take the form of thrilling slot games or online sports betting. For these players, the wins they get from these casino games are generally non-taxable. The Canadian government sees this form of gambling as leisure and not a means of earning a living.
The reason why CRA exempts casual gambling from being taxed is how it works. Gambling is based on chance, unlike regular income that is earned through consistent effort or skill. The wins are so unpredictable, and it can be burdensome trying to tax it for casual players. However, things start to change when gambling becomes a habit—playing casino games in an online casino Canada regularly.
2. Professional Gamblers: Gets Sticky
With professional gamblers, the story is quite different. For most of them, gambling is a business and a primary source of income. The CRA responds in kind and treats their wins like any other income, so they need to pay taxes.
The CRA expects tax returns because most professional gamblers employ skills and strategies to earn money like you would do in a business. However, the rule of thumb is to deduct all your expenses to lower the taxable amount. So, if the online casino charges you for deposits, take the amount from the total earnings to deduct the tax amount.
How CRA Levy Taxes on Professional Gamblers
The CRA considers some factors before deciding whether a player in a new online casino is taxed. This section briefly outlines them so you know if you fall in the taxable category or otherwise:
- Frequency: The CRA considers how often you gamble before making a verdict. If you are a casual weekend gambler, they ignore you. However, if you gamble multiple times a week, they could deem you a professional and tax you accordingly.
- Reason: The CRA also considers why you are gambling: is it for fun or with the intent to make a profit? If it is the latter, the CRA has more motivation to tax your wins. So, it is different if you simply enjoy playing games because you have access to the best online casino in Canada.
- Skill or Luck: CRA also considers if you rely more on skill or luck when gambling. Gambling comes in different forms. Some games require skills, while others are solely chance-based. For example, poker and sports betting require more skill compared to the popular game of slots. CRA may consider players dedicated to skill games to be professionals.
Other Tax Considerations for Gamblers
You can’t use your losses to offset your typical income as a casual gambler. Since CRA doesn’t view your wins through this route, your wins or losses have no tax relevance. However, it is pretty different for professional gamblers.
As a professional gambler, you can deduct gambling losses in the online casino against wins as part of your business expenses. However, you must be able to prove that gambling is a profession and not a hobby.
Also, tax laws still apply whether you gamble on an offshore casino online or a Canadian online casino. So, if you gamble at an online casino in Canada as a professional gambler, you may be subject to taxes. And you still have to report your winnings on your yearly tax returns, no matter how much or little gambling experience you have. You don’t need a license to do so.
Conclusion
CRA views online gambling as a chance-based activity, so they don’t typically tax it. However, there are some exceptions. Your level of expertise, the type of game you play, and how often you gamble can overturn the CRA’s stance and press taxes on your profits.
We recommend that you work alongside a tax attorney to prevent complications. While you might not have to pay taxes as a casual player, you must record your earnings, including those from gambling. That said, remember to gamble responsibly. If you want to start at any new online casino, research well. However, a good casino online is Slotier.
The control of gambling varies in different regions, please entertain according to local laws.
