Many Canadians find that playing online slot games is a fun way to pass time. It can also be highly rewarding, considering the huge amounts players can potentially win. Winning certainly feels good, but it can also raise concerns about taxes. Many players aren’t sure whether they are expected to pay taxes on their slot winnings. Considering the consequences of tax evasion, many players wouldn’t want to take chances (pun intended) on taxes on their slot winnings.
So, is a slot winnings tax a thing in Canada? Here is everything you need to know about taxes on slot winnings and gambling winnings in general.
Are Slot Winnings Taxable?
The Canadian federal and provincial governments consider various factors when determining which gambling winnings are taxable. Those factors include the type of game you played and won. The idea is that certain games require skills to win, while others don’t.
For slots, winning depends entirely on luck. There is practically nothing you can do to influence the slot machine’s outcome. Sure, some players try leveraging in-game bonus features, but nothing guarantees a win.
Since winning in slots is based on luck and not skill, the Canadian federal and provincial governments regard the winnings as a windfall rather than an income. To this end, no Canadian ever has to worry about a slot winnings tax, not unless the tax laws in Canadian slots change in the future. However, there is more to it than that, as you will find out as you continue reading.
What Types of Gambling Winnings Taxable?
Basically, any winnings from casino games that require skills are taxable, while winnings from games that require luck are not. Besides slots, other casino games and gambling activities that don’t require skills to win include the following:
- Lottery
- Roulette
- Keno
- Bingo
- Sic Bo
- Sports betting
However, it is worth noting that sport betting is a sort-of grey area when it comes to taxation. While winning depends on luck, the government can tax you if you consistently beat the spread, as this demonstrates talent and anticipation of profit.
In contrast, games where winning depends on skills (and a bit of luck) include the following:
- Poker
- Blackjack
- Video poker
- Sports betting & Daily Fantasy Sports (DFS)
For example, poker players can bluff their opponents, which is usually a handy skill. Moreover, video poker players can memorize the strategy charts.
Craps and baccarat also partly depend on skills, albeit they don’t have too much of an impact. Nevertheless, winnings from these games are also subject to taxation.
Who is Subject to Gambling Taxation?
Besides the type of game, the type of player also matters when it comes to slot winnings tax. According to the Canadian authorities, there are two types of gamblers for the purpose of taxation: casual and professional gamblers. Casual gamblers are exempt from taxes on all slot winnings. However, professional gamblers are not.
What is a Casual Gambler?
A casual gambler plays slots and other casino games mostly for fun rather than profits. While all casual gamblers hope to win, they don’t really need to.
Besides gambling for entertainment, casual gamblers also lack an organization. For example, they play sporadically instead of regularly. Additionally, many try their luck on different, random games. Notably, most Canadians who play casino games do so casually.
What is a Professional Gambler?
Professional gamblers focus on profits rather than fun. In fact, gambling is their primary source of income, and it is all some do. Notably, many professional gamblers do quite well, and the most acclaimed ones have won millions over the years.
To this end, professional gamblers view gambling as a business. For example, Jonathan Duhamel often said his business was playing poker. The Quebec resident later won $8.9 million at to 2010 WSOP Main Event.
Additionally, they have a more organized approach compared to casual gamblers. For example, they gamble more regularly and are pickier about the games they play. More importantly, they have better skills and more experience than casual gamblers.
Why are Casual Gamblers Exempt from Taxation & Professional Gamblers are Not?
Casual gamblers don’t expect to win when playing slots and other games. Everyone hopes to win, but they don’t treat their winnings as profits. To this end, the authorities consider their winnings as a windfall. As such, they don’t think it is fair to tax them, regardless of how much they win; you can win huge jackpot prizes casually playing slot or table game tournaments.
In contrast, professionals approach gambling as a business and treat their winnings as profits. As a result, the authorities consider their winnings as income, which is taxable. To this end, professional gamblers must pay taxes on winnings they get from skill-based casino games. Notably, taxes are levied at the provincial and federal levels, and they average about 50% when combined.
How Does the CRA Distinguish between the Two?
The Canada Revenue Agency (CRA) knows how to differentiate between casual and professional gamblers. They consider the following factors:
- Frequency: How often you gamble.
- Organization: Whether there is a systematic approach to your gambling activities.
- Game Type: Whether you prefer playing skill-based or luck-based games.
- Skill & Experience: Your level of skill and experience playing different games.
- Profit Motive: Whether your focus when playing is on making enough money to sustain your livelihood.
You must file your winnings as income if you are a professional gambler. You may get into trouble with the law for tax evasion if you fail to do so.
Are There Any Ways Around Gambling Taxes in Canada?
Claiming losses as deductions is the only way to get around gambling taxes in Canada. This is allowed in every other business. Since professionals treat gambling as a business, it is perfectly alright to report losses as deductions. However, any other attempts to avoid paying taxes can land you into trouble with the authorities. You can incur heavy fines or even risk doing time.
4 Tips to Boost Your Slot Winnings
While winning at slots entirely depends on luck, there are certain things you can do to boost your luck. The following tips always work:
- Pick Slots with High RTPs
RTP (Return to Player) is like a measure of a slot’s likelihood to pay out. A higher RTP means a higher likelihood of winning. Rates can vary significantly, from as low as 85% to above 98%. As such, pick slots with higher RTPs.
- Beware of Volatility Levels
Slot games have three volatility levels: low, medium, and high. High volatility means that you can win big. However, wins are few and far in-between. In contrast, low volatility means that you can win more often, but the winnings are small. Low-volatility slots are recommendable if you want to minimize the risk of losing.
- Understand the Slot before Playing
While slots may appear to move randomly, there is a method to the madness. For example, only certain symbols win, and only when arranged in a certain manner. You can learn more about how the slot works by studying its paytable. Better yet, you can play it in demo mode to get some practice.
- Leverage Bonuses & Bonus Features
Bonuses can enable you to play more slot rounds without necessarily spending money. As such, be on the lookout for casino bonuses like bonus spins and cash bonuses. You can also unlock or purchase in-game bonuses when playing certain megaways slots.
Conclusion
You don’t need to worry about a slot winnings tax in Canada. As a luck-based game, any winnings from slots are considered a windfall and hence aren’t taxable. However, professional gamblers are required to pay taxes on winnings from certain skill-based games.
