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December 23, 2023

How Are Online Gambling Winnings Taxed? Experts Explain

Many Canadian casino enthusiasts wonder—how are online gambling winnings taxed? 

Playing at online casinos is a common form of leisure that has the potential to result in sizable wins

Since these kinds of wins are not a consistent source of income, recreational gamblers are exempt from paying taxes on casino profits under existing Canadian gaming legislation. However, if you make a living playing casino games, you must record your winnings as income each year and pay taxes on them.

How Do Taxes Work With Online Gambling?

If you’re using an online gambling platform based outside of Canada, any taxes that may apply will depend on the tax laws of that specific country. 

Even though you don’t need to report online gambling winnings, it’s a good practice to keep records of your gambling activities, including both wins and losses. This can help you keep track of your financial situation, and you never know when it may come in handy in the future.

How Much Money Do You Have To Win at an Online Casino To Pay Taxes?

Canada has no precise criteria for how much money you have to win at an online casino before you need to pay taxes.

The taxation of gambling winnings depends on whether you’re amateur or professional, and it may vary between various types of gambling activities. If you win money playing casino games that are based purely on luck, like slots and roulette, your winnings won’t be taxed. Profits from games that require skill and experience, such as poker or blackjack, can fall into the category of income based on specific circumstances.

For example, if you play poker and often win, these three factors determine if you’re considered a professional:

  1. You’re consistently earning money by playing
  2. You had poker training
  3. You often attend tournaments

Determining who qualifies as a professional gambler can be a complex subject, so seeking a professional to give you legal advice is recommended.

How To Pay Tax on Online Betting—Amateur vs Professional

Source: besteonlinecasinos

The Canada Revenue Agency (CRA) might consider you a professional gambler if you engage in gambling on a regular and systematic basis to make a profit. This applies both if you’re gambling online and if you’re playing at traditional casinos. 

How To File Online Gambling Winnings on Your Taxes

Here are the general four steps for paying taxes on gambling winnings if you’re a professional gambler:

  1. Report income—In the appropriate section of your tax report card, provide accurate and detailed records of your gambling activities, including wins and losses
  2. Deduct expenses—Deduct allowable expenses associated with your gambling activities
  3. Pay taxes—Calculate the taxes owed based on your total income, including gambling winnings and any other sources of income
  4. File returns—File your income tax return by the deadline specified by the CRA

How Much Are You Taxed on Online Gambling?

Canada’s federal income tax system is progressive, which means that the tax rate increases as your income increases.

The federal tax brackets and tax rates are as follows:

Tax BracketsTax Rates
Up to $50,19715%
Between $50,197 and $100,39220.5%
Between $100,392 and $155,62526%
Between $155,625 and $221,70829%
Above $221,70833%

Keep in mind that these rates are subject to change, and different provinces and territories may have different tax rates.

What if You Win More Than $1,200 in an Online Casino Based in the US?

US law classifies gambling profits of US citizens above $1,200 as taxable income—except the winnings from blackjack, baccarat, craps, roulette, and the big-6 wheel. For non-residents, including Canadian players, the gambling winnings are subjected to a 30% tax on the total win amount, which is automatically deducted. Luckily, you can get this money back.

Due to a specific tax agreement between Canada and the US, Canadians who win money gambling in US-based casinos are subject to taxation by the IRS. This means that if you can demonstrate gambling losses or expenditures, you can recoup the deductions. You’ll need to apply for a US tax number to do this, though.

How Are Taxes Paid on Jackpots Won From an Online Casino?

Outside of Canada, jackpots won at online casinos are normally taxed in the same way as those won in traditional brick-and-mortar casinos. The taxing process varies depending on the country and its tax regulations. Gambling winnings are considered taxable income in many countries, including the US, and must be reported to tax authorities.

In the US, for example, you’d receive a form used for reporting gambling income to the Internal Revenue Service (IRS). To cover potential tax liabilities, the casino may withhold a portion of the profits, normally at a fixed rate of 30%.
In Canada, if it’s a luck-based win and not one you gained after years of experience—for example, a poker tournament prize—you don’t need to pay anything. If it’s a prize from a competition of some kind, it counts as business income, and you’d pay taxes on it the same way you would on any other type of business income.

Ten Trustworthy Tax-Free Casinos in Canada

To have an enjoyable and secure gaming experience, you should choose your online casinos wisely. To make it easier for you to find an online casino that provides safe and fair gaming, here are ten you should consider:

CasinoLicensesGateway
BetwayAGCO
MGA
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HelloCasinoMGA
UKGC
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Luxury CasinoMGA
UKGC
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Jackpot CityAGCO
AGCC
MGA
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Dream VegasAGCO
MGA
UKGC
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High Flyer CasinoAGCO
AGCC
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Lucky DaysAGCO
MGA
SWA
KGC
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Zodiac CasinoKGC
AGCO
MGA
UKGC
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CaxinoAGCO
MGA
GGL
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PokerStars CasinoAGCO
MGA
UKGC
SGC
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How To Claim Online Gambling Winnings

Source: besteonlinecasinos

You may be wondering—when you win while online gambling, how are the funds delivered to you? While a casino’s withdrawal procedure is generally simple, there may be some variations in the processes depending on the casino and the payment method you use.

To begin, you must sign into your casino account and go to your casino wallet, where you can then pick the payout option.

A few common withdrawal methods are:

As part of the withdrawal process, you may be asked to verify your identity and ownership of the payment method. This is done by providing the following:

  • A government ID, passport, or driver’s license
  • A utility bill not older than three months
  • A copy or screenshot of your bank statement, debit card, or eWallet

Deposit and Withdrawal Conditions

Check which payment options your preferred online casino supports and educate yourself on the following factors:

  • Transaction limits—Some casinos have set amount limits on deposits and withdrawals. Most online venues set the deposit limit at $10, but this might vary based on your preferred payment method and other casino rules
  • Processing Times—While all payment options normally provide instantaneous deposit times, withdrawal processing periods might vary. Depending on the payment option, the time frame might range from 24 hours to a few business days. Casinos have the option to delay processing withdrawals for a certain period. The goal of this procedure is to stop money laundering and fraudulent operations, and it often lasts up to 48 hours
  • Fees—The majority of online casinos don’t impose any fees on their customers when making transactions. While there are no fees for making transactions, there may be some for the conversion of currencies or withdrawing sums that aren’t within the limitations

You can find all the information about the mentioned factors in your preferred casino’s Terms and Conditions section.

How Jackpot Winnings Are Delivered

When it comes to major jackpot prizes from online casinos, there are two main payout possibilities:

  1. Lump payment
  2. Installments

The option to receive a lump sum payout or opt for monthly installments can be influenced by the online casino’s terms and conditions, as well as your preferences. 

The lump payment option is popular because it provides quick access to the earnings, allowing you to start managing all the money right away. For the sake of easier management, though, some winners prefer to receive their money in installments over an extended period.

The best option for you—if you ever get lucky enough to be in this position—would depend on your financial situation and financial management skills. You can never go wrong with consulting a financial advisor, though. 

How Much Can You Win on Online Betting?

The potential winnings in online gambling can vary depending on the type of game, your strategy, and your luck. Slot machines and other games of chance often offer massive jackpots that reach into the millions of dollars, while casino games like blackjack or poker can bring you more moderate gains. 

Sports betting also offers the chance to multiply your initial bet, potentially resulting in substantial profits.

It’s important to note that gambling involves risks, and there’s no winning guarantee when playing casino games.

Featured image source: stevepb

Teemu Salminen

Teemu is our go-to pro for Payments and Regulations. He's got the savvy to navigate casino finance.

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