Are Gambling Winnings Taxable In Canada
- Are casino winnings taxable in Canada? If you are an ardent casino player who plays for both the fun and the money, Canada is the place to be! If you are not a professional gambler who depends on casino winnings to make a living, you have nothing to do with the Canadian Revenue Agency.
- The general rule on legal gambling winnings and taxes in Canada is simple. Unless you are a professional gambler, you do not need to pay taxes on your gambling winnings.
The concept of not taxing gambling winnings is older than Canada itself. It started in England and says that unless you make a living exclusively from gambling, or treat gambling as a business, you should not pay taxes.
US offers a promising gambling experience but comes with a price, while Canada offers less but doesn’t take away winnings.
Gambling has been a popular activity for centuries across the globe. However, since the modernization of society, some nations have adopted certain laws pertaining to gambling.
The US imposes certain restrictions on players, which effectively dampens the overall experience for regular gamblers. Even though one may be a winner, he is still a little bit of a loser, as he stands to give away a portion of his winnings to the tax man.
Canadian players on the other hand, can play all they want and remain complete possession of their gaming earnings, as taxes do not apply to prize money earned through games of chance.
Gambling in the US
Gambling in the US is generally viewed in the negative light, as many Americans will agree with one another that participating in such an activity is unsavory.
Nevertheless, there are plenty of people in the US that like to gamble, regardless of what the contemporary perception is. However, when a gambler goes into a gambling institution and manages to win some money, he is liable to pay taxes on his winnings, as dictated by the US gambling laws.
• Winnings in US taxed, but experience is worth it
• Winnings in Canada not taxed, but overall experience is lower
• Non-residents of US are sometimes exempt from paying tax
Although there is a tax, one can view it as an expense for receiving some premium benefits. It is an unwritten law that every serious gambler should visit and, more importantly, partake in games in the world’s “Gambling Mecca” known as Las Vegas.
Casinos and institutions alike are obliged to charge players 30 percent or more on their winnings. Sometimes the percentages may exceed 30 percent, depending on a number of factors.
In addition, according to the Internal Revenue Service (IRS), virtually all gambling winnings are taxable. Lotteries, raffles, casinos, mobile betting firms, horse and dog races and any other kinds of gambling activities fall under taxation obligations, if one is fortunate enough to win something.
Players must maintain an accurate record of all their winnings and losses throughout the year, by filling the appropriate forms. Otherwise they may be liable to certain penalties, if they are found of breaching specific regulations.
Gambling in Canada
Whether one is betting on sports events, casino games or other forms of gambling, winnings are not taxed by the Canadian law.
Winnings that are obtained from online gambling sites in Canada are never taxed. However, when it comes to poker, there is an exception. If one is professional poker player, one will have to report his prize money to the proper authorities.
Games of chance are not viewed as proper means to make an income, while poker holds a certain view that skill is more involved in the concept of the game, than chance or luck. But then again, proving that one is a pro poker player is quite tricky, so the law is murky when it comes to this.
Non-Canadian residents are also not liable to pay taxes on their winnings, and are entitled to keep their prize money form gambling activities. However, US players that are looking to cross the border to gamble, in hopes to reserve the right to keep the winnings would be wrong.
US residents have it hard, as they have to pay tax on winnings, regardless where they won the prize money. Therefore, even playing in Canada, US players will still have to give away part of their gambling income to the IRS.
Exceptions to the tax law
When non-US residents decide to visit the States and try their luck in the gaming world, some players are destined to win money, and for that, special rules may apply for them at certain times.
If an alien resident or foreigner were to have success in a casino in the US, then his winnings would automatically be taxed by the IRS. However, there are ways to get the money back, but it involves going through a highly complex process that requires additional time and money.
Hiring or consulting with an expert in the field that knows the ins and outs of the matter is advisable, but then again these individuals or firms impose a percentage on getting back one’s winnings for them.
Additionally, one has to first obtain a so-called non-resident ITIN (Individual Taxpayer Identification Number), with which one can start the procedure and attempt to get the winnings back.
Not only that, but the IRS does not allow any individual to initiate the move without an authorized Certifying Acceptance Agent, who is tasked with handling all the business on a player’s behalf.
Therefore, the entire trouble is not worth the hassle concerned with US gambling laws, unless there are millions involved. It is advisable to just relinquish the efforts and accept the 70% of the winnings.
When it comes down to it, gambling the US may very well prove to be an unforgettable gambling experience, however it comes with a price for providing the premium service.
While Canada should be viewed as the long-term gambling solution. Players are allowed to retain all of their winnings, which means that each time one wins he is able to keep 30% or more, than he would have if he had gambled in the US.
However, if a non-Us resident has the means and the patience to follow through with the procedure of getting his money back, then playing in the US would be a win-win.
Gambling Taxes: The Canada-US Tax Treaty
It’s a fact: Canadians like to gamble. Whether we’re hitting the local casino for the night, or taking a jaunt down to Las Vegas for a week, we love the thrill of a game of chance, and the possibility that this time, just maybe, we’ll be the ones to win big. Of course, the culture surrounding gambling differs slightly between Canada and the US, and there is one significant difference that often blindsides Canadians visiting US casinos: the gambling winnings tax.
In Canada, gambling winnings, be they from casino games or from playing the lottery, are generally not considered a taxable source of income – these winnings are clearly not generated by an office, employment, or property, and barring a few anomalous instances, gambling is not considered by Canadian law to be a business. It relies too much on chance, and almost no one is capable of making a steady income at gambling. So for Canadians gambling at home, what we win is what we get, whether it’s $100 from playing quarter slots, or $1,000,000 from playing a provincial lottery.
This isn’t the case in the United States. Under US law, substantial gambling winnings – which typically means wins over $1200 – on games other than blackjack, baccarat, craps, roulette, and the big-6 wheel are considered taxable income. For Canadians (and other non-resident aliens), the gambling winnings tax is 30% of the total win. This tax is withheld at the source, so while you might walk out with $100 if that’s all you win in a US casino, if you win $1500, you’ll be walking out with $1050. That’s a not-insignificant loss of money, and the more you’ve won, the more you’ll lose in casino withholding taxes.
Prior to 1996, that would have been the end of it. A Canadian gambling in the US would have to walk away from the casino with their winnings, less the gambling withholding tax, and be happy for the amount they were able to keep. However, the introduction of Article XXII of the Canada-US Tax Treaty changed this. Under the Treaty, Canadians are now allowed to deduct US-source gambling losses from their US-source gambling winnings, and obtain a casino tax refund based on that amount.
To qualify for casino tax recovery as covered by Article XXII of the Canada-US Tax Treaty, you need to be able to substantiate all US-source gambling losses. To this end, it’s a good idea to keep a diary of all wins and losses made in the US, including dates, times, locations, and amounts won and lost. Also acceptable as proof are statements issued by the casino, wager tickets, casino credit records, and bank withdrawal statements.
The Tax-Exempt Status Of Gambling Winnings In Canada
In order to file for casino tax recovery, you’ll need to obtain an ITIN, or Individual Taxpayer Identification Number, from the IRS if you don’t have one already, and file a non-resident tax return. This will cover your gambling wins and losses for the entire year. Improperly completing either the application for your ITIN or the tax return form can drastically lengthen the wait time, or in the latter case, potentially result in you not getting any of your money back. To prevent this, you would be well advised to engage the services of a refund management firm familiar with the process of casino tax recovery to fill and file the required forms, and to ensure that you have all the necessary documentation on hand. US Tax Recovery is a good bet for all your casino tax recovery needs.