Canada Gambling Tax: Are Winnings Taxable? (2026 Guide)

The Short Answer: No Tax for Recreational Gamblers

For most Canadian gamblers, winnings are completely tax-free. The Canada Revenue Agency (CRA) does not tax gambling winnings for recreational players.

This is explicitly stated in Canada's Income Tax Act under Paragraph 40(2)(f), which treats gambling winnings as "windfalls" that are not subject to tax.

Tax-free treatment applies to:

• Casino winnings (online and land-based)
• Sports betting profits
• Lottery prizes (Lotto 6/49, Lotto Max, provincial lotteries)
• Poker tournament winnings
• Horse racing
• Bingo

If you're a casual gambler, your winnings are yours to keep.

Why Canada Doesn't Tax Gambling Winnings

The CRA views gambling as a recreational activity where outcomes are primarily determined by chance. Winnings are considered "windfalls" similar to inheritances, gifts, or strike pay.

The underlying principle: income tax is meant to capture the fruits of labor, business, or investment. Gambling winnings from recreational activity don't fit any of these categories.

This interpretation has been consistent for decades and applies across all provinces.

When Gambling Becomes Taxable

Here's the important exception: if the CRA determines you're gambling professionally, your winnings become taxable as business income.

The distinction is whether gambling constitutes a "business" under Canadian tax law. The CRA and courts consider several factors:

Pursuit of Profit

• Is profit your primary motive, or is it entertainment?
• Do you treat gambling as a job?

Systematic Effort

• Do you use a consistent strategy or system?
• Do you study and analyze extensively?
• Do you have specialized knowledge or expertise?

Time Commitment

• How much time do you dedicate to gambling?
• Is it a significant portion of your week?

Business-Like Conduct

• Do you keep detailed records?
• Do you manage a dedicated bankroll?
• Do you treat it with the seriousness of a business?

Income Dependency

• Is gambling your primary income source?
• Do you rely on it to meet living expenses?

Skill vs Chance

• Is your success attributable to skill?
• Can you demonstrate a consistent edge?

The more factors present, the more likely the CRA will view your gambling as a business.

The Leblanc Case: Landmark Ruling

The 2006 Tax Court of Canada case Cohen v. The Queen (often called the Leblanc case) provides key guidance. The court held that for gambling to be a business:

1. There must be a pursuit of profit
2. The activity must have some skill element
3. The taxpayer must operate in a business-like manner

Pure games of chance (like lottery or slots) almost never qualify as business income because they lack the skill element. Poker and sports betting are more likely to cross the line for serious players.

Poker: The Gray Area

Poker sits in a unique position. It's clearly a skill game, and professional poker players exist. Canadian courts have ruled on poker taxation multiple times.

Key principles from case law:

• Recreational poker players, even successful ones, don't owe tax
• Players who approach poker as a business may owe tax
• Tournament success alone doesn't make you professional
• Regular live play at a professional level likely is taxable

If you're a serious poker player making significant money, the lines can blur. Consider professional advice.

Sports Betting After Ontario Legalization

Ontario legalized single-game sports betting in 2022, following federal Bill C-218. Other provinces followed with their own systems.

The tax treatment remains unchanged:

• Recreational bettors pay no tax
• Professional bettors may owe tax
• The province where you live doesn't affect the federal rules

The expansion of legal betting hasn't changed the fundamental CRA position on gambling taxation.

What About Losses?

This is a crucial asymmetry:

Recreational Gamblers:

• Winnings are tax-free
• Losses are not deductible
• Cannot offset gambling losses against other income

Professional Gamblers:

• Winnings are taxable as business income
• Losses are deductible as business expenses
• Can deduct related expenses (travel, equipment, subscriptions)

If you're classified as recreational, you can't deduct $20,000 in losses against your salary. But if you're professional, those losses reduce your taxable gambling income.

Interest on Winnings IS Taxable

While gambling winnings themselves are tax-free, any interest or investment returns on those winnings are taxable.

If you win $100,000 at the casino and put it in a GIC earning 4%, the $100,000 is tax-free but the $4,000 in interest is taxable income.

This applies to any investment returns: interest, dividends, capital gains, rental income from property purchased with winnings, etc.

Provincial Differences

Gambling taxation is federal, not provincial. The rules are the same whether you live in Ontario, British Columbia, Quebec, or Alberta.

However, provincial gambling corporations (OLG, BCLC, Loto-Quebec, etc.) may have their own reporting for large prizes. This is typically for administrative purposes, not taxation.

Reporting Requirements

Recreational Gamblers:

• No requirement to report gambling winnings
• No requirement to keep records for tax purposes
• Winnings don't appear on your T1 return

Professional Gamblers:

• Must report gambling income as business income
• Must maintain detailed records of all bets
• Should track all related expenses
• File using form T2125 (Statement of Business Activities)

US Gambling: A Complication

If you gamble in the United States, different rules apply at the source.

American casinos and sportsbooks withhold 30% of winnings above certain thresholds from Canadian visitors. This is a US tax, not Canadian.

Canada and the US have a tax treaty that may allow you to recover some or all of this withholding. The process involves filing a US tax return (1040NR) to claim treaty benefits.

The underlying winnings remain tax-free in Canada (for recreational gamblers), but you need to deal with US withholding separately.

Practical Advice

For Recreational Gamblers:

• Enjoy your tax-free winnings
• Keep basic records for your own tracking
• Document large wins for bank anti-money laundering compliance
• Understand you can't deduct losses

For Serious Gamblers in the Gray Area:

• Consider whether your activity looks "professional" to the CRA
• Keep detailed records either way
• Consult a tax professional if uncertain
• Be consistent in your approach

For Professional Gamblers:

• Accept that winnings are taxable business income
• Keep meticulous records of all activity
• Track all deductible expenses
• Consider working with an accountant experienced in gambling taxation
• The upside: losses and expenses are deductible

Common Questions

How much can I win before paying tax?

There's no dollar threshold for recreational gamblers. The question is about how you gamble, not the amount. You can win millions tax-free as a recreational player.

Do lottery winnings get taxed?

No. Lottery winnings are always tax-free because there's no skill element. You cannot be a "professional lottery player."

What if I win at a US casino?

The US will withhold 30% from large wins. You may be able to recover this by filing a US return and claiming treaty benefits. The winnings remain tax-free in Canada (if recreational).

Can the CRA audit me for gambling?

Yes, particularly if you deposit large amounts or your lifestyle seems inconsistent with reported income. Keep documentation of significant wins.

Do I need to report gambling on my tax return?

Recreational gamblers: no. Professional gamblers: yes, as business income.

Key Takeaways

• Gambling winnings are tax-free for recreational players under the "windfall" rule
• Professional gambling income is taxable as business income
• The CRA considers skill, time, conduct, and profit motive to determine status
• Losses are not deductible for recreational gamblers
• Interest earned on winnings is always taxable
• US gambling involves withholding that can sometimes be recovered
• There is no dollar threshold that triggers taxation for recreational players
• When in doubt, keep good records and consider professional advice

Sources:

• Canada Revenue Agency - Windfall Gains
• Lucas CPA - Sports Betting Tax Canada
• Casino.org - Canada Gambling Tax