Online slot games are increasingly popular across Canada. With fair play guaranteed at licensed and regulated online casinos, anyone can get lucky and win. Indeed, many people are getting lucky and winning. The wins range from modest amounts to huge jackpot-like prizes for the really lucky players.
Considering that online gambling is now licensed and regulated in Canada, many players often wonder whether their slot winnings are taxable. Ultimately, this depends on various provinces’ tax laws in Canadian slots and various other factors. This article outlines everything you need to know about slot winnings taxation in Canada.
Taxation Depends on Various Factors
Whether or not online slot winnings are taxable in Canada depends on various factors. It ultimately comes down to the tax laws in Canadian slots, which differ between the various provinces. It also depends on the nature of your gambling; whether you play slots casually or professionally. Your nationality also counts in certain provinces. Here is a closer look at these factors.
Professional or Casual Gambling?
There are two types of gamblers: casual and professional gamblers. Depending on the type of gambler you are, you may or may not be subject to a slot winnings tax.
A casual gambler plays slots mostly for fun and not profits. Moreover, they play occasionally. Any money they win when playing is like a windfall, and that is how tax laws in Canadian slots regard casual gambling winnings: windfall.
In contrast, a professional gambler plays mostly for profits and not fun. Their goal is to win enough money to sustain their livelihoods; it is worth mentioning that many do quite well. Moreover, they play more regularly than casual gamblers; in fact, many professional gamblers spend most of their time playing.
Casual gamblers are in luck, as their slot winnings are exempt from taxation across all provinces. As mentioned, the federal and provincial authorities consider casual gambling winnings as a windfall.
However, authorities consider winnings from professional gambling as income, since it is enough money to support players’ livelihoods. To this end, professional gamblers are legally obligated to report the “income” from their gambling activities. Moreover, they must pay taxes on this income, which essentially is the winnings from slots and other games.
Tax rates vary between different provinces depending on their respective provincial gambling tax rules. They are considerably higher in certain provinces than in others.
How Do Authorities Differentiate between Casual and Professional Gamblers?
Everyone, including professional gamblers, would prefer not to pay taxes on their slot winnings. However, the authorities have reliable ways of identifying professional gamblers. They consider various factors, including the following:
- Frequency: How often you gamble.
- Time: How much time you spend gambling.
- Profit: Whether your gambling activities are profit-oriented.
- Winnings Usage: Whether your livelihood depends on your slot winnings.
- Skill: How good you are at gambling.
These factors are easy to monitor. As such, it would be a bad idea to try to circumvent the tax laws in Canadian slots.
Interestingly, the size of your winnings doesn’t count when determining the nature of your gambling activities. This is because anyone can win big, even casual gamblers.
Are You a Foreigner Gambling in Ontario?
Ontario has some of the most elaborate tax laws in Canadian slots, considering that it was the first province to legalize online gambling. Like all the other provinces, Ontario only taxes slot winnings from professional gambling. However, casual gamblers who are non-residents only enjoy this privilege up to a certain point. This is because any winnings above $10,000 are subject to a 30% withholding tax in Ontario.
Don’t Forget about Federal Taxation
While it is the provinces that regulate online gambling in Canada, the federal government also has a say. Like the provincial governments, the federal government also taxes winnings from professional gambling. The Canada Revenue Agency (CRA) monitors gambling activities across all provinces to identify and tax professional gamblers. When combined, provincial and federal tax rates usually range around 50%, take or add a few points.
Looking to the Future
Ontario was the first province to legalize only gambling in Canada in 2022. Notably, other provinces are still working on their online gambling tax laws, and none are yet as detailed as Ontario’s. As such, the online gambling industry is still very young and is bound to keep evolving. This means that tax laws could change in certain provinces. While it is unlikely that provinces will start taxing casual gamblers, tax rates for professional gamblers could change over time.
Conclusion
Slot winnings are taxable in Canada if you are a professional gambler. They are taxable at the federal and provincial levels. The rates depend on your province. However, tax shouldn’t be a concern if you are a casual gambler.
