Do Professional Gamblers Pay Tax?
Recently updated on November 13th, 2023
Yes, the Canadian taxman will make you pay tax if you are a professional player. There are two types of gamblers in CA, pro and recreational gamblers. If you have turned your casino activities into a business and regard gambling as your source of income, then you will have to pay tax.
However, you are playing the lotto, blackjack or scratch cards for fun, then you are exempt from paying tax. The majority of Canadian players are considered as recreational players. If you are considering becoming a professional gambler, you will want to continue reading!
When Do Professional Gamblers Pay Tax?
Nowhere in the Income Tax Act does not clearly outline when a gambler goes from recreational to professional. It may take a few years of you being a full-time gambler before the Canada Revenue Agency considers you as a pro. Also, you will have to be a profitable player such as Daniel “Kid Poker” Negreanu or any of the players from the list of top Canadian poker players. These players have made millions from casino games and continue to win large sums of money.
Some players have tried to claim that they are professionals in hopes of writing off their losses. The Canadian gambling law permits gambling professionals to write off their losses if they can prove to be a profitable gambling pro. Of course, the taxman will not take these claims kindly.
Pay Tax on Winnings
Again, if you are a recreational player, you won’t have to pay tax on our winnings. It doesn’t matter how much you win. Professional players have to declare and pay tax on their winnings. They will fill out and submit a T5 slip. Should the gambler fail to submit the slip, they can get smacked with a hefty fine. However, this only applies to gambling winnings in Canada.
Both recreational and professional Canadian gamblers have to follow the host country’s gambling tax laws. For example, if you play at an internet casino in the USA and win over $1,200, you will have to pay 30% tax. You won’t have to do the math as this amount will be withheld at the cashier.
Canadian players don’t have to worry about losing that amount as the casino tax refund for Canadians will refund US Taxes withheld from gambling winnings, lotteries or prizes. You will be required to prove your losses or related expenses in order to qualify for the tax refund.
So, just how much tax will you face when you become a professional gambler. The income tax brackets will be based on your net income. You will need to be meticulous when keeping your records, and you must remember to use all the allowed deductions. That means jotting down when you won, lost and any other deductions.
The basic tax brackets that apply to Canadian players are as follows:
- A $46,605 income will pay 15% in taxes
- If you make $46,603 or more, you will pay 20.5%
- An income of $51,281 pays 26%
- A total of about $61,353 pays 29%
- If you make $205,842 or more, you will pay 33%
It is safe to assume that The Income Tax Act applies to both land-based and real money online casinos as there is no clear distinction as to which gambling form applies. At the same time, each of the provinces and territories have their own unique gambling rules and laws. The gambling tax rules applies to all of them. These rules are the same across Canada, where all pro players have to pay tax, and recreational players are exempt.