Many gamers at the authorized online casino Canada sites aren’t familiar with the taxation system. It’s reasonable to wonder if winnings should be subject to taxation. The good news is that you needn’t worry about it, as the law is generally on the side of the participants.
Let’s go deeper into the nuances of the country’s tax and online gambling legislation, as well as the distinctions between playing for fun and for a living.
The Canadian Tax System and Internet Gambling
Since Canada’s tax rules make a distinction between professional gamblers and recreational gamers, these laws generally favor the former. Professional gambler is defined as one who earns income from gambling, among other things, according to section 40(2)(f) of the Income Tax Act.
Most people who gamble at the legitimate Canadian online casinos don’t bother reporting their gains because they’re just there for fun. The government does not tax recreational gamblers because they do not rely on their gains to support themselves. Another factor is that the money wasn’t earned or gained through legitimate means like property or a job.
However, you may end up in a position where you end up indirectly paying taxes on your gaming earnings. Let’s look into it.
Taxes, Interest, and Prize Money
Suppose you played at one of the fantastic legal online casinos Canada players adore and we recommend, and you won a huge prize. You put it in a savings account so it can collect interest instead of being spent.
If this is the case, your winnings will be tax-free. The interest you accrue on your savings, however, is considered taxable income and must be reported and taxed as such. When filing your taxes, you must include a T5 form to report any interest earned on your winnings. If you win money and don’t report it, you could face fines if the government finds out about the interest you’ve been earning on your savings.
Gamblers, Both Pro and Amateur
As was previously established, professional gamblers are the only ones subject to taxation on their gains under Canadian law. A professional player will have a different mindset than a casual player, and you’ll learn the difference between the two in this article.
Gamblers who make a living at it To be considered a “professional gambler” under Canadian law is a high bar to clear. To be called a professional, it takes more than just a regular winning streak or lots of time spent at licensed casinos. Instead, you’re considered a professional gambler if you consistently use skill to turn a profit, if gambling is all you do for a living, and if you treat your gambling like a company. Because of the law’s emphasis on ability, those who play Poker or Pool are more likely to be considered professional gamblers.
Recreational players – In Canada, recreational gamblers make up the vast majority of players. They do it for fun, regardless of whether they’re playing online slots, Roulette, live dealer Blackjack, or any of the other games available. The vast majority of gamblers have stable jobs and do not engage in the activity daily; any financial gain is a welcome bonus.
It’s one thing to win money gambling at a legal Canadian online casino, and quite another to win as a Canadian citizen in the United States. Winnings from a US online casino may be subject to a 30% withholding tax due to the various regulations.
Canadians who bet in the United States are subject to income tax on their gains under a specific arrangement with the IRS. You can receive back at least some of your gambling losses if you can establish that you actually incurred those costs or lost money. To get your withholding tax back, you’ll need to get a tax ID from the Internal Revenue Service and file the right paperwork.
Land-Based Casino Gambling
The Income Tax Act makes almost no distinction between traditional casino gaming and online gambling. If you are just playing for amusement, then your gains are exempt from taxation.