The online betting industry has taken off in Canada, growing by leaps and bounds in the last handful of years. While online sportsbooks get a lot of attention, it’s beyond that. There are also real money online casinos that are accessible on computers and mobile devices. Of course, for those who win money on these betting platforms, one question that needs to be asked is if there are taxes to be paid on those winnings. The good news is that unless you’re a professional gambler, it’s unlikely that you’ll have to pay a significant amount of taxes on gambling winnings. Nevertheless, it’s pertinent to clear up some common questions about taxes and gambling in Canada.
Do Canadians Pay Taxes on Betting Profits?
The short answer to this is no. Paragraph 40(2)(F) of the Income Tax Act states that Canadians don’t have to pay taxes on money won from land-based casinos, online casinos, horse racing, or online sportsbooks. This is the law of the land in all provinces, so there is no need to check with provincial laws.
Are There Exceptions to Know About?
While gambling winnings aren’t taxed directly, if you earn interest from them, that money should be reported. For instance, if you take your gambling winnings and store them in a savings account or use them to buy a stock that pays dividends, you will have to pay taxes on that money.
If you are a Canadian resident, any additional income earned by investing your winnings must be reported on your T5 slip, T3 slip, and T5013 form as part of your investment income. This income is taxable at rates ranging from 15% to 33%, depending on your income level.
While you may not receive a T5 form if your investment income is under $50, you are still required to report it. Failure to declare these earnings can result in prosecution by tax authorities and significant fines. Additionally, this income must be included in your income tax filing, with tax rates varying by province.
It’s also worth noting that professional gamblers whose income comes from poker or sports betting are required to declare gambling winnings as part of their taxable income. These winnings are subject to both federal and provincial tax assessments. In such cases, all gambling winnings should be reported, although it’s possible to deduct losses.
What About the Lottery?
Playing the lottery is a little different from winning money at an online sportsbook or casino. However, the tax rules for lottery winnings are the same. That money isn’t taxed directly, but if it gets reinvested in stocks that pay dividends or savings accounts that earn interest, that money must be declared as taxable income.
