Are Your Online Gambling Winnings Taxable?

Will the Montreal Alouettes win their next game? Will Shein go public this year? What will be the top Netflix movie in the world this week? If you think you know the answer to these or countless other questions, you can bet money on them. Sports betting, prediction markets, online poker, and other forms of gambling are common in Canada. According to Statistics Canada, in 2022, nearly two-thirds (64.5%) of Canadians aged 15 or older (18.9 million people) reported gambling in that year.

If you win money from gambling, you might wonder whether you get to keep it all. Will the Canada Revenue Agency (CRA) tax your winnings? Maybe there's some relief if you can write off your losses?

“The good news is that, generally, personal winnings from gambling are not taxable by the CRA,” says Julie Thibodeau, a tax expert with TurboTax Canada. “But there are a few exceptions, and you should know when your winnings might creep into taxable territory.”

Are gambling winnings taxable in Canada?

If you take part in casual gambling, any winnings are yours to keep. The CRA does not tax lottery, casino, poker, or sports betting winnings. And it doesn't matter whether they are earned online or by playing blackjack in Niagara Falls. Winnings are considered personal windfalls. Of course, because those casual gambling winnings aren't taxable, that also means you can't write off any gambling losses.

However, if you are a professional gambler and your winnings are your primary source of income, that income could be considered to be business income. Business income is taxable, and there could be an opportunity to write off some of those losses. Let's look at the nuances.

Casual gambling vs. professional gambling: What's the difference?

If you gamble occasionally or for entertainment, you're considered a casual gambler. That means that your winnings are not taxable by the CRA. But if you're gambling for profit and it's a primary source of income, this could be viewed as professional gambling and your winnings could be considered taxable business income. Here are some of the differences:

Casual gambling (winnings not taxable)

• You gamble occasionally or for entertainment
• You don't gamble in a structured or business-like way
• You don't use formal systems, such as betting algorithm software
• Gambling is not your primary income source

Gambling as a business (winnings taxable)

• You gamble frequently and consistently
• You gamble for profit, not entertainment
• Your gambling involves skill and strategy (e.g., professional poker)
• You track and analyze your gambling activity
• Gambling is a primary source of income rather than a hobby

The CRA looks at several factors and takes a case-by-case approach. What if you're not sure if you're a casual gambler or running a business? Consider speaking with a tax expert who can help you determine whether to report your gambling income.

US winnings

Canada may not tax your winnings, but that's not necessarily the case in the United States. Whether you're gambling on an American betting site from within Canada or you're physically at a US casino, your winnings could be subject to a withholding tax.

The US typically withholds 30% of gambling winnings paid to non-residents. For Canadian residents, the threshold for automatic 30% US federal withholding on winnings is USD$600, provided the payout is at least 300 times the amount of the wager. But just because tax wasn't withheld doesn't mean that the winnings aren't taxable, and you may have to report your winnings to the IRS. Under the Canada–US tax treaty, Canadians may be able to file a US non-resident tax return and potentially recover some of the tax paid or withheld.

Why tracking your online gambling wins and losses matters

“Taxes are rarely cut and dry,” says Thibodeau. “It's always advisable to keep documents related to your online gambling, just in case the CRA decides to ask questions related to your gambling activity.”

Keep organized records of your bets, wins, and losses and which platform you were using, as well as a running total of your winnings. Download your bank statements in case you need to reconcile your winnings with your bank deposits.

If you gamble for business purposes, you'll want clear documentation of your winnings and expenses and any cryptocurrency transactions (if applicable). Use a spreadsheet or a gambling tracker app, for example.

And even if you're a casual gambler now, it's a good idea to document your bets in case your gambling becomes a business activity down the road. With documentation, you can show when the transition occurred.

Reporting business gambling income on your taxes

If you are reporting your gambling winnings as part of your self-employed business taxes, you'll use Form T2125 – Statement of Business or Professional Activities. 

On the T2125, you will report:

• Gross gambling income from all winnings (tournaments, online gambling, sports betting, etc.)
• Business expenses (losses, entry fees, software, portion of your internet costs, home office expenses, banking or payment processing fees, for example)
• Net business income (or loss)

If you have questions about how to report your winnings, losses, and expenses, a

TurboTax expert may be able to help.

“While you don't have to report casual winnings on your tax return, don't think that the CRA won't know if your gambling is a business activity,” warns Thibodeau. “If there is a casino audit, or your lifestyle doesn't match your declared income, it could raise red flags and land you in some hot water.”

A note about gambling with cryptocurrency

The occasional bet may not be taxable, but you could face a tax hit if you are gambling with cryptocurrency.Using cryptocurrency is emerging as a common way to gamble. New online crypto casinos are popping up, but be cautious—many are not regulated, and these casinos may be located in other countries, meaning that your winnings could be taxable there.

Also, if you do use cryptocurrency to gamble, be aware that even if your gambling winnings aren't taxable, crypto transactions can create taxable events. In Canada, cryptocurrency is treated as a commodity, not currency. That means using crypto to place a bet is a “deemed disposition.” Cryptocurrency is subject to capital gains when you use it to gamble.

Example:

You bought 1 Ether token (ETH) for $2,000.

Its value rises to $3,000.

You use all $3,000 to gamble.

You may have a $1,000 capital gain (of which $500 would be added to your income and subject to tax), even if your gambling winnings are not taxable (or even if you lose it all).