Canadians enjoy iGaming, which has really taken off in provinces such as Ontario, where private operators can obtain licences to offer their services to citizens, who can play legally on their websites. Naturally, these casinos wish to attract new players and retain existing ones, and one of the ways they do this is by offering bonuses. Some will match deposits up to a specific amount. Some will offer free spins on slots and possibly even a deposit. Some will give players free credit for signing up to play at the online casino on gaming.
Of course, bonuses are exactly that, bonuses, and citizens may be unsure about whether to include them when they’re completing their annual tax declaration. Below is a look at the impact of gambling on annual tax returns and who, if anyone, might have to pay taxes on bonuses or gambling-related income.
Should you worry about your annual tax return when you gamble?
As long as you’re playing for fun, no. Whether playing poker, casino games, sports betting, or the lottery, under federal law, Canadians don’t pay tax on their winnings if the gambling is recreational.
Winnings from international online casinos are also not taxable if you’re playing for fun. However, you should check that the casino is licensed and legitimate. Playing at unregulated ones could cause problems.
It’s a good idea to keep a record of your winnings in case the Canadian Revenue Agency (CRA) has any questions about your gambling activity. You should also declare your winnings for accountability and be aware of any provincial or local laws regarding taxation.
Exceptions
There are exceptions to these taxation rules, however. Generally, if gambling is considered a source of livelihood or business activity, the winnings will be subject to taxation. There are several circumstances where this may be the case.
Professional gamblers
If gambling is your primary source of income and you play full-time, the CRA may consider you a “professional gambler,” so you may have to report the bonus. Professional gamblers must declare their winnings as taxable income, plus any interest or dividends their winnings generate, and any winnings they achieve through bonuses or promotions.
Professional gamblers are likely maximize the amount they can play with through tracking down bonuses. Resource sites like Casino.ca can be invaluable here, as they enable serious gamblers to find the best casino bonuses in the country and use them to their advantage. This is a good strategy whether you’re an experienced gambler or an amateur, as you can try new games or build some winnings at the casino’s expense.
Here are some ways to determine whether the CRA could see you as a “professional gambler”:
- Gambling is your main source of income
- You’ve been earning money for an extended period through gambling
- You practice regularly and have specialist knowledge of gambling
- You attend tournaments often and travel to gamble
- You plan to rely on your profits from gambling for your livelihood.
Frequent and organized gambling
If you gamble regularly, with a high frequency, and earn large amounts of money from gambling —especially if you depend on these winnings for income — the CRA might consider this a business activity. Having betting methods or strategies also suggests a business-like approach and will have the CRA expecting you to declare your winnings.
Record-keeping and planning of your gambling
If you keep records of all your strategies, wins and losses, the CRA may also interpret this as ‘gambling as a business activity’ and expecting to see gambling winnings in your annual tax return.
Gambling as employment
If an online casino or related business employs you, your income from the employment will be subject to taxation. It doesn’t matter whether the income comes from gambling or something else.
The good news is that if the CRA considers you to be a professional gambler or your gambling activity to be a business, you can deduct expenses such as travel to tournaments, the cost of poker tournaments, or other related business expenses. You may also be able to deduct losses from gambling as expenses.
Should you worry about your annual tax return when you receive an online casino bonus?
The short answer is no, and this is for the same reason as before: the gambling is recreational. Authorities may tax employment bonuses — which they do at the same federal and provincial/territorial rates as the rest of your income — but not online casino ones. Only if you gamble professionally is taxation on online casino bonuses something to keep in mind when filling out your annual tax return.
Generally, citizens who are participating in gambling for recreational purposes have little need to fear the CRA because winnings from recreational gambling aren’t taxable. If, however, gambling provides you with a livelihood or is considered a business activity, you’ll have to declare your winnings as taxable income, plus any interest or dividends gained from them. If you’re unsure about your situation, consult a tax professional to enjoy your winnings worry-free.