Asides from being close neighbours geographically, Canada and the US share some other similarities. Both countries boast solid sports teams, especially in athletics. This is a significant reason why gambling strives well in each jurisdiction. Like every sovereign nation, however, laws differ, as do the regulations guarding all gambling types, especially the taxes in the countries.
Initially, both governments were against online casino gaming. Players were hunted down, and banks asked to seize funds suspected to result from gambling winnings. Thankfully, times have changed, and Canadian gamers can enjoy internet gambling on their favourite bookmakers. Top bonuses and games are no longer scarce, like the royal vegas casino review, which lists reputable casinos and their various benefits when playing. The situation is no different from Americans looking to play and win. But how does the government tax winners?
Here, we review the tax laws affecting gambling winnings in Canada and the US. This article discusses if there are similarities or critical differences.
Gambling Regulation in Canada
Since online gambling is currently taking over, it is essential to know if you must turn over a percentage of your casino payouts to the government. Thankfully, Canada’s situation is preferable to that of the USA.
Like the USA online gambling, gaming at an online casino’s legality rests solely with the provincial government. Again, the situation is unclear since the Kahnawake Gaming Commission also issues operation licenses to specific operators. Another common factor is seen in the US gambling scene.
For every type of gambling played by Canadians, the general rule is no tax is being charged on winnings. According to government regulations, gambling is not considered a continuous income source and is not obtained from direct employment, property, or other means of payment. In the eyes of the law, getting taxes on this type of income would be unfair.
So, you do not have to pay them as a Canadian when you wager and win on horse racing, lotteries, online casinos, and other games of chance. However, there is a clause here. If you receive interest on all winnings, this must be indicated on a separate T5 form. Here, taxes must be paid, and defaulters have a fine.
Professional Gamblers
However, the laws say you must pay a tax if you identify as a professional gambler in Canada and make a living from wagering and winning games. Here, being a professional gamer is regarded as freelancing and is subject to being taxed.
There is a clause here, though. While the Canada Revenue Agency is responsible for assessing and auditing persons with income from gambling, they are slow. So we haven’t seen a clear case of tax recovery yet. A significant reason is that such people are said to conduct businesses and record losses from time to time, which affects businesses.
Gambling Tax Situation in the US
Just as there are laws on gambling taxes for Canadians, Americans are also subject to them. A similarity with Canada is that gambling is regulated mostly at the state/provincial level, just as the US Supreme Court upturned the PASPA law in 2018. However, there’s a big difference. All gambling winnings in the country are subject to a “Federal Income Tax.” So, in summary, yes, no matter the state you are, all payouts are taxed.
For states’ taxes, the situation is not the same all through. Some governments do not require a surcharge, and others do. The rules differ depending on your state of residence. For states that require a tax, it could be calculated based on a formula or a flat percentage is used all through.
So, based on Federal tax laws, you must file a form W-2G when your casino payouts reach the following limits:
- $1,200 or higher for bingo and slot machines.
- $1500 or more for keno.
- $5000 or higher from poker tournaments.
- $5000 from lotteries, sweepstakes, and betting pools.
- $600 and higher for other gambling types. (the wins must be a minimum of 300 times higher than the wager).
All gambling winnings are subject to a rate of 24% for Federal taxes. The following states do not require a tax on payouts:
- Alaska.
- Florida.
- New Hampshire.
- Nevada.
- South Dakota.
- Tennessee.
- Texas.
- Washington.
- Wyoming.
Conclusion
There are fundamental differences between the gambling taxes in Canada and the US. While the US still has more of a grey payout situation, Canada’s tax recovery law is transparent. It is possible to be prosecuted in the US if the Federal Government does not get your tax when you win by gambling.
