Online slot games are increasingly popular across Canada. Millions of Canadians play them occasionally. Moreover, a substantial and growing number of people are playing slots more often than not.
Many Canadian slot players get lucky and win cash prizes. Wins vary in size from small to substantial. Whatever the case, playing slots becomes a money-making venture. So, what are the Canada Revenue Agency (CRA) rules on winnings from slots? Are winnings taxable? Here’s what slot players in Canada need to know about CRA gambling winnings rules.
CRA Tax Rules for Gambling Winnings
As the revenue authority for Canada, the CRA regulates all money-making ventures, broadly speaking. Gambling can be financially rewarding, and players regularly win cash prizes. To the CRA, this is yet another money-making activity that can be taxed.
However, whether or not your winnings are taxable depends on whether or not they can be classified as income, which depends on the type of gambler you are. The CRA categorizes players into two types: casual or professional gamblers.
Casual Players Don’t Pay Taxes
Casual players are not obliged to pay taxes under CRA gambling winnings rules. This is because winnings from gambling are considered a windfall if you are doing it for fun. As such, it doesn’t matter how big the win is; you don’t need to worry about taxes if you are a casual gambler. You can simply withdraw your money and be on your merry way. However, it is still advisable to record substantial wins in case any big deposits trigger an audit.
Professional Players Pay Taxes
Gambling winnings turn from windfall to income if you are a professional gambler. Professional gamblers play casino games as a business venture and even as their main source of income. As with all income, you are obliged to pay taxes under CRA rules. As such, you must report your winnings as self-employment income under Form T2125. Professionals are also required to document and record all of their gambling winnings, losses, and expenses.
Interestingly, just like gambling income is taxable, losses and expenses are tax-deductible. Expenses include costs like buying gambling equipment (computers, routers, and so on), traveling to and from casinos, and the likes. More precisely, you can deduct them from your gambling income.
Where Do You Stand?
So, are you a casual or professional gambler? There are various factors that the CRA considers when making this distinction. They include the following:
- Profit motive: Professionals are out to make a profit; they need to win enough money to sustain their lifestyles.
- Frequency of gambling: Professional gamblers play more often than casual gamblers.
- Organization: Professional gamblers have a more organized, systemic approach to playing casino games.
- Skill: Professionals demonstrate more skills and expertise at playing casino games, especially skill-based games.
The CRA urges professional gamblers to maintain record of their gambling activities in case of audits. Notably, the agency can easily nab cheats, and there are no ways around paying your gambling taxes.
Provincial Tax Rules
Besides the CRA, provincial governments can also tax gambling winnings. Interestingly, in Canada, it is the provincial authorities that do most of the licensing and regulation. Regulation includes taxing gambling operators and individual players.
Provincial gambling tax rules and rates vary between different provinces. Some rates are considerably higher than others. Notably, players must pay taxes to both entities: the federal government via the CRA and their respective provincial governments.
Interestingly, gambling tax rules across all provinces are quite similar to the federal tax rules. Most notably, winnings from casual gambling are not taxable. Moreover, winnings from slots are exempt from taxation, as they aren’t skill-based games.
Slot Winnings are Exempt from Taxation
It doesn’t matter whether you are a casual or professional gambler: winnings from slots are exempt from taxation. Sure, playing slots is gambling. However, not all forms of gambling are taxable. The CRA only taxes winnings from games where your skills can help your chances of winning.
Card games like poker and blackjack are games of skill. To this end, more skilled and experienced players win more often than novice players. In contrast, slots don’t require any skills to play or win. You only need to spin to play, and outcomes are entirely random and unpredictable. As such, slot winnings are exempt from taxation. To this end, slot players need not worry about the CRA, regardless of whether they are professional or casual gamblers.
Tips to Boost Your Tax-Free Slot Winnings
Winnings from slots are not subject to CRA gambling winnings taxes because they are not games of skill. This means that you can keep every dollar you win. And, while you don’t need skills to play and win, you can still boost your success in various ways. The following tips will help boost your tax-free slot winnings:
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Check RTP & Volatility
A slot’s RTP percentage can have a direct impact on your likelihood of winning. A high RTP rate means that the slot pays out more often and in larger quantities. Some slots have RTPs below 90%, while others have rates as high as 98%. Ideally, you should go for slots with RTP rates above 96% to increase your chances of winning.
Besides RTP rates, volatility also matters. Volatility levels vary between low, medium, and high. Slots with low volatility pay out small, frequent wins. In contrast, slots with high volatility pay out bigger wins less frequently.
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Read & Understand the Paytable
Everything about a slot seems random if you don’t understand how it works. However, there is a method to the madness, and you can understand it by reading the paytable. It contains information like the slot’s RTP and symbol values. As such, always read the paytable before playing the game. You can access it by clicking the slot’s information icon.
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Take Advantage of Bonuses
Bonuses can go a long way in boosting your winning chances. Promos like cash bonuses and bonus spins give you more chances to spin, and every spin creates a new opportunity to win. As such, always claim bonuses whenever possible. Besides the casino’s bonuses, some slots also have in-game bonuses and buy-in features. As such, consider picking Megaways slots for more bonuses.
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Practice with Demo Slots
It takes some time to learn how slots work if you are new to the game. Moreover, it takes time to learn and understand individual slots. Practicing helps, and the best way to do it is by playing slots in demo mode. Demo slots come with credits that you can use to play unlimited times. Ideally, you should practice with the particular slot you want to play.
Conclusion
CRA gambling winnings rules only apply to professional players. However, slot winnings in particular are exempt from taxation, even for professionals. As such, you don’t have to worry about breaking any laws when you pocket your winnings. In fact, you can sharpen your slot skills to boost your winnings knowing that they are tax-free.
