Online gambling in Canada has become one of the most sought-after entertainment formats for numerous citizens. Some have even taken to professional sports betting to maximize their skills and talents. If you aspire to be a professional bettor someday, then knowing the laws, prizes, and taxes is paramount.
Exploring Gambling in Canada
Canada has become a hotbed for gambling enthusiasts over the last few years. After a historical jurisdiction was passed in April 2022, Ontario also joined the fray for all online gambling activities. Now, Canada typically has given free rein to provinces when it comes to the legalities of gambling.
As a Canadian, you must note that you’re not prohibited from playing casino games at international casinos either. What’s important is that irrespective of the type of gambling activities you indulge in, keeping track or record of the same is mandatory.
Amateur vs. Professional Taxes
Canada has two major ways of calculating gambling income – first, non-taxable windfall and second, taxable business income. The reason for this is to create a distinction between amateur gamblers and professional gamblers.
Amateur gamblers, by nature, do not expect any winnings. Hence, their profits from gambling are treated as unintended profits. On the contrary, a professional gambler’s profits are taxable in the sense of being a business that expects profits in lieu of the skills, consistency, and objectives set out.
A point of clarity in Canada’s gambling profit taxation structure is that the element of profit expectancy ultimately determines the basis of taxation in the country. To determine the same, the Canada Revenue Agency uses multiple parameters, the key ones being:
- To what extent a gambler’s activities are profit-focused.
- Whether or not the gambler had access to skills and knowledge that allowed them to counteract the element of chance to land winnings.
- The frequency with which the player engages in gambling activities.
- If there is any indication that the taxpayer relies on gambling as their main source of livelihood.
Gambling Income Is Dependent on the Games Played
Alongside the question of amateur vs. professional gamblers, the government of Canada has provisions in place to mandatorily exclude and include certain types of winnings under the category of profits-bearing tax liability.
For instance, prize money from lotteries, slot machines, or roulette wheels is considered a windfall for any gambler, amateur or professional. The reason is that such games have no skill requirement and are solely left up to chance.
Secondly, winnings from sports betting and other similar events are not taxed since the gambler has no direct influence on the game they are betting on. In this case, the exception to the rule is a person who beats the spread consistently. It indicates that the person has talent, purpose and profit anticipation, thus making their profits eligible for taxation.
When we come down to games which are directly influenced by the player, like Poker, Blackjack, etc., the profits are generally considered taxable. The reason being a professional gambler expects a profit out of the same activities. However, these profits can also be treated as windfalls based on the circumstances and the experience of the player. In such cases, the frequency of a player at the table also holds a significant bearing on the tax liability.
The Nitty Gritty of Professional Gambling
Professional gamblers are often treated as individual businesses. If you rely on gambling as your main source of income, then you are a professional gambler. In such a case, you can confer tax benefits. For instance, if an entertainment professional approaches you for your gambling skill and you’ve maintained the record of your games, you may qualify for tax deductions. Further, if you work as an independent contractor, you’re allowed to deduct game-related costs. Gambling losses incurred by professional gamblers are also tax deductible. It is considered a business-related expense.
Thus, Canadian gambling laws are quite fair. if you’re unable to figure out whether your income from gambling activities is taxable or not, we suggest reaching out to a tax attorney at the earliest.
Related News Articles
Last Updated: July 19, 2023