Most nonresidents that pay the 30% tax on their gambling winnings are not able to recover any of the withholding tax, unless there is a reduced tax rate provided in a tax treaty. Special Rules for Canadians. The U.S. and Canada entered into a tax treaty in the 1980’s. In 1995, the U.S. and Canada signed Protocol 3, amending the 1980 Tax Convention between the U.S. and Canada, which added a third paragraph to Article XXII (Other Income). Paragraph 3 of Article XXII states the following: According to Canadian gaming lawyer Jack Tadman, there is only one case in Canadian law where someone had to pay taxes on gambling winnings that had no connection to a previous business or occupation. That case was Luprypa v. Canada (1997), which involved a man who had lost his job and began playing pool for money at a local bar. There is no set tax rate on gambling winnings in Canada. The tax rate for professional gamblers or for bettors gaining interest off their gambling winnings is determined by multiple factors such as total income, total losses, and total taxes paid over the year (i.e. you have a secondary income you paid taxes from). Your gambling winnings are generally subject to a flat 24% tax. However, for the following sources listed below, gambling winnings over $5,000 will be subject to income tax withholding: Any sweepstakes, lottery, or wagering pool (this can include payments made to the winner (s) of poker tournaments). But you may wonder how much tax you’ll pay on all that money. The good news is that in Canada, your winnings are usually tax-free! Lotteries Winnings from a Canadian lottery such as Lotto Max or 649 are considered to be windfalls, and windfalls are not subject to tax. Even winnings from a sweepstake or lottery sponsored by a charitable organization are generally tax-free. Everything from your local hockey team’s 50/50 draw to the Big Brothers/Big Sisters travel lotto vouchers are ... That's because the vast majority of Canadian gamblers will never pay a cent in income tax on their 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. No - Canadians do not have to pay taxes on gambling winnings from horse racing, sports betting, lotteries, online casinos and any other games of chance. However, if you earn interest on your winnings, you must legally declare that on a T5 form. This interest is taxable. Should you be caught not paying taxes on this, you could be fined. Gambling Winnings Tax in Canada There is no gambling winnings tax in Canada if you are a recreational gambler. The Canadian Revenue Agency generally keeps its hands off any money earned through gambling. We use the term “generally” because there are exceptions to the rule.
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