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Tax In Ontario and Gambling - What Do You Pay On Online Casino Winnings?

Tax In Ontario and Gambling - What Do You Pay On Online Casino Winnings?

2022/04/04

There’s no doubt that online gambling has dramatically risen in popularity in Canada in recent years. Many Canadian territories already boast their own government-run online casinos, and Ontario was the first province to launch a regulated online gambling market including Ontario casino sites. Yet, with this boost in admiration has come an increase in earnings for gamblers. And as in every case, more earnings mean more attention from the tax authorities.

Not everyone is a winner and playing exciting online slots and casino games is more about the fun and entertainment factor. Yet, earning a little extra profit on the side is an added casino bonus. Therefore, gambling and taxes in Ontario are two items many gamblers think about often. If you win, what do you pay in taxes on your earnings? With different rules and laws on taxes in varying countries, you might be wondering what you must pay.

Don’t worry. We are here to alleviate your concerns. While we will take a closer look at what taxes you pay on your online casino winnings in Ontario, the tax in all other provinces across Canada is the same. Canada applies these gambling tax laws to all land-based and online casinos across the country. So, no matter if you reside in Ontario, Quebec, Saskatchewan, or any other region, this handy guide will tell you everything you need to know.

These taxation regulations also apply at internationally-licensed casino sites, including the top-rated sites recommended on this page, most of which accept players from Canada. Still, there is much to consider before you get started. So, if you’re ready to learn more about tax in Ontario on your gambling winnings, read on. There’s a lot to cover, so let’s get started.

Do Canadian Bettors Pay Taxes on Casino Winnings?

You’ll be delighted to discover that all Canadian recreational casino players do not need to pay taxes on their gambling winnings. This rule pertains to Ontario, as it does to all of Canada. Gambling-related activities, such as spinning the reels of online slots or dealing the perfect hand in an exciting table game, are not considered a constant source of income in the eyes of the law in Canada. Therefore, the law does not deem it fair to tax any earnings from gambling.

Similarly, any winnings from luck-based games in the country, like horse racing and poker, do not get taxed. You can celebrate your winnings without worrying about paying out a significant amount to the government. Ultimately, you do not have to pay any taxes on winnings from participating in gambling in a casino environment.

However, the Canadian taxation laws shift slightly for bettors who make a living from their gambling winnings. If you’re a professional gambler and earn money from bets regularly, you will pay taxes on your earnings. Professional gamblers are deemed as those who make most of their income from gambling in Canada.

If you’re a professional gambler, you will need to report your winnings and losses on your tax return at the end of the fiscal year. You must fill out a T5 form, also known as the Statement of Investment Income. This slip is required by the CRA from residents to report their income and earnings from various investments, including gambling. This action will help the government determine what you owe.

Yet, there’s no need to deal with a tax rate in Canada. What you pay varies depending on what you make. It also depends on the money you earn from gambling. Some lawyers will guide you through the requirements depending on your income from bets.

Ultimately, gambling at Ontario casinos and gambling at Canadian casinos faces similar taxation policies. Nothing is required unless you’re good at what you do in the betting room.

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When Do You Need to Pay Taxes on Casino Winnings?

If you make a small amount of money through winnings at online casinos, you don’t need to pay taxes. For example, if you win a couple of hundred Canadian dollars on a table game, claim some free spins on an online slot, or grab a nice win on a live dealer game every once in a while, you are not required to pay taxes on these winnings.

A tax on casino winnings is only necessary if you make most of your income from these bets or if you are a professional gambler. Otherwise, you can hang on to everything you win.

Professional gamblers are defined by paragraph 40(2)(f) of Canada’s Income Tax Act. Any winnings and losses must be reported if you meet the criteria set forth by the government. Again, a professional can help you with your tax on casino winnings if you make most of your income from bets. Unless you meet these circumstances, you do not have to pay any money to the government.

According to the above paragraph of Canada’s Income Tax Act, a taxpayer’s profit or loss from the disposition of a prospect to win a bet or prize, or a right to receive funds as winnings on a wager in connection with gambling or lottery schemes is nil. In simple terms, your gambling earnings are not taxable, and any casino losses are not deductible.

Ultimately, your gambling winnings are considered “windfalls” and are therefore exempt from any income tax.

Categories of Taxation

There are three different categories of cases within Canadian law that handle the taxation of gambling winnings. Firstly, we will look at casino players who gamble recreationally or as a hobby. As we now know, the gambling revenue of these individuals is not taxable, even though they may frequently win and have various systems and strategies for wagering. As per Canadian regulation:

Winning enough money by gambling to earn a living does not, by itself, account for a taxable income.

Similarly, the degree of interest or passion to which an individual devotes to gambling in Canada does not change its nature.

Yet, an organized system for minimized risk is what distinguishes a recreational casino player from a professional gambler. Therefore, the profits of a casual gambler are not taxable.

On the other hand, there are cases where an individual’s gambling activities directly relate to their business or source of income. The gambling winnings of these casino players are taxable. Let’s take a closer look at some examples:

The proprietor of a casino who is taxed on their gambling earnings at their own gambling venue.

A horse handicapper who regularly wins money at the track. If this individual also raises and races horses, bets on their own horses, wagers on other horses, has no other form of employment and spends approximately 30 weeks per year at the track, they have to pay taxes on any earnings.

Yet, the final category makes the determination of gambling taxation a little more confusing. This category introduces a new variable: skill. For example, say an individual lost their job and began playing pool for money. This person practised Monday to Friday, then visited bars (while sober) to play against intoxicated competitors.

As per Canadian law, since this individual uses skill and expertise to earn a living in a gambling game (where skill is a notable component), their gambling earnings are taxable.

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History of Gambling Taxes

While Canada does not tax any winnings made from casino gambling, the act of taxation is much older than the country itself. We can date the first record of organized taxation back over 5,000 years ago, yet it has developed and changed over the years and across different countries. There have been many amendments as our world has embraced the art of gambling. We’ve even made it into a living for some professionals.

In the past, gambling taxes used to be more of a requirement. However, it’s since been determined that something for recreation generally does not seem worthy of taxation. There are now rules and regulations based on how much you bring in from the activity. Some countries have taken to banning gambling altogether for the safety of citizens.

Yet, in others, the legalities surrounding gambling taxes differ slightly. For example, in the United States, three elements of taxation emerged; wagering transactions, professional gamblers, and recreational gamblers. Yet, in the United Kingdom, taxes are no longer required. Also, in Germany, there’s a 5% tax based on winnings. And, as we’ve talked about, there are no taxes on winnings in Canada unless bets are how you make your living as an individual.

Gambling taxes will likely continue to grow and evolve as gambling also develops and advances. The world is always on the move, and there are always new territories to explore with matters like gambling. As our world becomes more and more virtual, it will be interesting to see what happens with online gambling.

Speaking of which, does taxation vary between land-based gambling and online gambling? Let’s dive into that question next to give you a better understanding of these payments.

Taxation of Land-Based Gambling vs Online Gambling

Although land-based and online casinos are two different forms of gambling, Canada’s Income Tax Act doesn’t distinguish between online and offline gambling, whether you bet on online poker, online bingo or sports markets. Because of this absence, we can assume that the same rules apply to both. Unless you’re a professional gambler, you don’t have to pay taxes on what you earn through bets both online and in brick-and-mortar gambling venues.

Canadian bettors don’t need to worry about separating online earnings into one group and land-based income into another. All receive the same treatment when it comes to giving money back to the government. Of course, professional gamblers must pay taxes on their earnings both online and offline. Therefore, no matter if you make a living off placing bets online or support yourself from in-person gambling wagers, you will need to pay income taxes on both methods of making a profit.

Gambling Taxes in Canadian Provinces

Although land-based and online casinos are two different forms of gambling, Canada’s Income Tax Act doesn’t distinguish between online and offline gambling. Because of this absence, we can assume that the same rules apply to both. Unless you’re a professional gambler, you don’t have to pay taxes on what you earn through bets both online and in brick-and-mortar gambling venues.

Canadian bettors don’t need to worry about separating online earnings into one group and land-based income into another. All receive the same treatment when it comes to giving money back to the government. Of course, professional gamblers must pay taxes on their earnings both online and offline. Therefore, no matter if you make a living off placing bets online or support yourself from in-person gambling wagers, you will need to pay income taxes on both methods of making a profit.

Income Tax And Gambling

If you do not earn a living off your gambling winnings, you pay absolutely no income tax on your casino earnings regardless of what kind of game or contest you play. Since casino gambling is technically not a constant source of income, the taxation of casino winnings is not considered fair in the eyes of the CRA.

Yet, income and gambling tax go hand in hand in Canada. It means everything when determining if you must pay taxes on your gambling winnings. Therefore, the winnings from professional gamblers will be taxed according to the same guidelines as other regular jobs and full-time work. The tax brackets in Canada are based on your net income or your gambling earnings throughout the year.

Yet, if you run a gambling operation like a small business, you can also subtract losses and expenses from your income like any other self-employed individual.

Gambling Taxation Laws in Different Countries

Travelling to a different country to gamble means dealing with varying laws of taxation that contrast Canada’s tax on casino winnings. Many countries, like Canada, do not tax casino winnings. Yet, in others, you may need to hand over a significant chunk of your winnings. It’s crucial to understand the taxation laws and regulations when gambling internationally. Remember to do your research before heading anywhere new to make bets.

In the meantime, let’s take a closer look at a few of the contrasting gambling taxation laws in countries besides Canada.

United States: Here, gambling winnings are fully taxable. Bettors must report any gambling winnings on tax returns, including horse races, online bingo, lotteries, and more.

Luxembourg: Citizens in this country face an 80% tax rate on their earnings.

Australia: You can expect a 45% tax rate for a gambling tax here.

Below, you can find a list of countries where gambling is legal, but you will not have to pay taxes on winnings (aside from Canada).

  • Austria
  • Belgium
  • Bulgaria
  • Denmark
  • Germany
  • Italy
  • Malta
  • Sweden
  • UK

Canadians Gambling in Other Countries

So, if you’re a Canadian casino bettor wishing to gamble across the world, bear in mind that different countries come with different taxation laws. It’s essential to understand the rules around taxes when travelling internationally. For example, in Canada’s neighbour to the south, the USA, your gambling winnings are fully taxable, and you may be subject to a 30% withholding tax on your winnings.

However, all is not lost. You can claim your earnings back if it’s possible to prove gambling losses or additional expenses. You will need to apply for a US tax number for this to happen. Then, you will have to complete the necessary paperwork with your personal information. After that, you should be able to receive your funds back from the government.

Summary

Ultimately, it’s not surprising that many Canadian bettors are worried about casino tax when the laws in various countries differ so drastically. After all, you want to hang on to as much of your winnings as possible. If you’re a casino player in Canada, you don’t have to worry about paying taxes. Unless you’re a professional gambler and make earnings off this process, there is no requirement to pay taxes based on your earnings at a casino.

Yet, it’s vital to remember that other countries do not boast the same tax requirements as Canada. You may come across distinct rules and regulations, such as the 30% withholding tax that comes with gambling in the United States of America. If you travel to other places, ensure you do your research first.

Still, if you’re ready to access the top-rated Canadian casino sites, you’re in the right place. Head to our list of recommended online casinos today and claim a great welcome bonus. Now you know all there is to know about casino taxation laws in Canada; you can gamble in confidence at our highlighted sites!

FAQ

How much can I win when gambling online before I have to pay taxes?

If your online gambling earnings overtake your primary source of taxable income, then you will have to pay taxes on your online casino winnings. Once you pass this point, you are considered a professional gambler in the eyes of the law. If you earn any interest on your earnings, you must complete a T5 form to declare this legally.

Why don’t Canadian casino players have to pay taxes on casino winnings?

Gambling is not considered a steady source of income. The Canadian government does not count anything that provides inconsistent income as something in need of taxation. Yet, once your winnings become steady and you earn a living from your earnings, you will have to pay taxes on online casino winnings and on-ground casino earnings.

Do the rules of casino winnings taxes differ by region, city, or province?

No matter which region, city, or province you are in, you won’t have to pay a gambling tax on your casino winnings unless you’re a professional gambler and betting wins make up most of the money you earn. The regulations for online casinos and land-based gambling may shift by province, but the taxes in Canada do not.

Do I have to pay taxes on my sports betting earnings in Ontario?

If you live in Ontario, you do not have to pay taxes on your sports betting earnings. Betting on sports works the same as wagering on online slots, casino games, or putting money down on anything else; if you’re not making a living, the government doesn’t see it as a stable income.

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Ziv Chen

Ziv Chen

Content Writer

Ziv's Story

Ziv Chen has been working in the online gambling industry for over two decades in senior marketing and business development roles. Ziv writes about a wide range of topics including slot and table games, casino and sportsbook reviews, American sports news, betting odds and game predictions. Leading a life full of conflict, Ziv constantly struggles between his two greatest loves: American football and US soccer.

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