Looking for easy answers related to gambling tax Ontario rules?
I was, and I decided to create this Ontario gambling tax FAQ for anyone who wants quick and straightforward answers (like I did) to some of the most common questions related to taxes and iGaming.
Although I have written other FAQ-ish posts in the past (including one that briefly touched on Ontario gambling tax), I’ve decided to try something new and write dedicated FAQ-based gambling posts.
These FAQ posts will be related to gambling in Ontario (mostly gambling at online casinos) and will cover the various topics that apply to my experience, that interest me, or that I’m curious about. Essentially, I’ll be writing the type of FAQ style article that I personally like to read when I want to know something quick and uncomplicated about a topic.
I’ve decided to start with the Ontario gambling tax FAQ first, because this was one of the topics I was most curious about before I started gambling online. Plus, it’s a popular one among Ontario players for obvious reasons.
Explanation done, let’s get to the Ontario gambling tax FAQ.*
*Note: In case you’re wondering, the following information applies to Canada, not just Ontario.
Ontario Gambling Tax FAQ
Do I have to pay tax on my gambling winnings in Ontario?
The answer is no if you are a recreational gambler, which means you gamble for fun and its not a source of income.
The answer is yesif you are a professional gambler and gambling is your main source of income and/or you earn large amounts of money from gambling.
For the majority of us recreational gamblers (myself included), gambling isn’t considered a business and most of us don’t make a living on our winnings. Therefore, what we win we don’t have to pay taxes on.
It doesn’t matter if our winnings come from online or land-based gambling establishments. All gambling winnings, including casino winnings, sports betting winnings, bingo winnings, and lottery winnings are tax-free in Canada.
Do I have to pay tax on lottery winnings?
Nope. If you’re the lucky person who wins Lotto 6/49, Lotto Max, Lottario, or any other lottery in Canada you can eligibly play and claim, what you win is tax-free. The same goes for scratch cards.
This tax-free benefit doesn’t just apply to recreational gamblers either. Even professional gamblers can enjoy lottery and scratch cards winnings tax free.
When are online gambling winnings taxable in Canada?
They are taxable if the Canada Revenue Agency (CRA) considers you to be a professional gambler. A professional gambler is someone who treats their gambling as a business and is earning income on their winnings. This means that you rely on your gambling winnings as a primary or only source of income, and you use skill and expert knowledge to secure consistent wins.
Typically, professional gamblers focus on one skill-based game, such as poker or blackjack, and they typically gamble full-time offline or online. Other traits that qualify a person to be recognized as a professional gambler by the CRA include:
- Proof of consistent, long-term profit.
- You’ve been earning money from gambling for a few years.
- You frequently travel for tournaments.
- You consult with experts and/or take classes to improve skills and strategies.
That said, even for professional gamblers, scratch cards and lottery winnings are not taxed.
How much income tax do professional gamblers have to pay in Ontario?
Canada gambling tax rates vary by province. In regard to Ontario gambling tax, the tax rate range is from 5.05% to 13.16%. For instance, any income between $42,201 and $84,404 has a 9.15% tax rate. This tax rate increases to 11.6% for earnings between $84,404 and $150,000 and will increase again after this point. The higher your income, the more Ontario gambling tax you can expect to pay.
Can professional gamblers deduct losses from their taxable income?
Technically, yes. Professional gamblers can write off gambling losses and claim business expenses such as travel and tournament entry costs. However, proving that these losses should be treated as a tax deductible is difficult and the CRA is apparently slow to assess and audit individuals whose source of income comes from gambling.
Ultimately, due to the complexity of declaring gambling as a business income, if you do want the CRA to recognize you as a professional gambler, it’s a good idea to get in touch with an accountant or tax lawyer prior to filing your taxes to make sure you meet all the requirements and have everything in order.
What happens if I don’t declare my winnings?
If you’re a professional gambler and gambling is your main source of income, not reporting this is illegal. It can result in penalties, fines, and even criminal conviction. It’s not worth the risk because the government will eventually find out and it will come back to bite you in the long run, causing you to pay far more than you would have if you just declared your earnings in the first place.
Do I have to pay Ontario gambling tax on winnings I deposit in the bank?
You will if this money collects interest. Interest earned on gambling/lottery winnings in a bank account and dividends earned from interest on winnings in stocks, mutual funds and any Capital Gains made are subject to tax.
So, while you can win millions of dollars by hitting a lucky slots jackpot or by winning the lottery and not be taxed, as soon as you deposit that money and it starts to earn interest, tax kicks in.
The key takeaway is this: you’re not taxed on winnings, but you can be taxed on interest earned from these winnings.
Is crypto gambling taxed?
Crypto winnings are tax-free as long as you’re not a professional gambler.
More specifically, crypto gambling (using Bitcoin, Litecoin, Ethereum, etc.) is taxed like any other type of gambling in the country. While taxation doesn’t apply to owning or holding cryptocurrency, what is subject to tax, according to Toronto-based tax law firm TaxLawCanada, is…
- Selling cryptocurrency.
- Gifting cryptocurrency to another user.
- Trading or exchanging cryptocurrency.
- Using cryptocurrency to buy goods or services.
- Converting crypto to Canadian Dollars.
Do Canadians pay taxes on gambling winnings from the United States?
Yup. The reality is that if you win more than US$1,200, you’ll automatically be taxed on your winnings. A good thing to know if you’re heading to Vegas.
Since tax laws here are quite different from our neighbours to the south, the Canada and US Tax Treaty was created to prevent confusion when gambling over the border. As such, Canadians must comply with US regulations when gambling in the United States.
One of these regulations is that the US IRS will charge a 30% tax withholding on winnings higher than US$1,200 and this tax applies to all types of gambling winnings – slots, table games, poker, bingo, sports betting, etc.
On the plus side, under the Canada-US Income tax treaty (Article XXII) Canadian residents can claim a tax refund on gambling losses up to the amount of the US gambling gains for the year.
Ontario Gambling Tax – Quick Recap*
☑️Online and land-based gambling winnings are tax-free in Ontario for recreational gamblers.
☑️Professional/full-time gamblers must declare their winnings as income and file taxes.
☑️Lottery winnings and scratch card winnings are tax-free for all gamblers, including professional gamblers.
☑️Gambling winnings are not taxed but any interest earned from these winnings in the bank or investment is.
☑️Gambling losses are not tax deductible unless you’re a professional gambler declaring an income.
☑️Crypto gambling is not taxed unless you’re a professional gambler declaring an income.
☑️The same gambling tax rules apply across all provinces in Canada. The only thing that differs from province to province are tax rates.
☑️The US IRS charges Canadians 30% tax withholding on winnings over US$1,200.
Bottom line, if you’re like the average Ontarian gambler who plays for fun, you won’t have to pay Ontario gambling tax on your winnings when you gamble online or offline in Canada.
Just remember that if you deposit that money into a bank account or into an investment, any interest earned on that money is taxable.
Until next time, good luck and have fun!
Mia 👩💻
**All links and images in this post are for information purposes only.
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