Winning Big? Here’s the Tax Truth Canadians Should Know
Whether it’s a life-changing lottery jackpot, a casino windfall, or a lucky night at the poker table, the first question that comes to mind is often: “Do I have to pay taxes on this?” The answer in Canada is usually a pleasant surprise, but there are important exceptions you should understand.
Lottery Winnings in Canada are 100% Tax-Free
One of the perks of living in Canada is that lottery prizes are not taxable. Whether you win $500 on a scratch ticket or $50 million in Lotto Max, the Canada Revenue Agency (CRA) considers it a windfall gain, not earned income.
Key points:
- You do not need to report lottery winnings on your tax return.
- This applies to provincial lotteries (Lotto Max, Lotto 6/49, Daily Grand) and charitable raffles.
- Even if you receive your winnings as a lump sum or in installments, they remain tax-free.
Casual Gambling Winnings, Also Tax-Free
If you enjoy recreational gambling, whether it’s blackjack in a casino, sports betting, online slots, or a friendly poker game, your winnings are generally not taxable.
The CRA’s reasoning: gambling for fun doesn’t constitute employment, business, or property income.
However:
- Your gains are tax-free.
- Losses are not deductible for casual players.
- Any money you later invest from your winnings is taxable if it earns interest, dividends, or capital gains.
When Gambling Winnings Become Taxable: The Professional Gambler Rule
Things change if the CRA decides you are a professional gambler. In this case, gambling is treated like running a business.
You may be considered a professional gambler if:
- Gambling is your primary source of income.
- You gamble frequently and systematically.
- You use skill, research, and strategy to generate consistent returns (e.g., poker, sports betting).
- You keep detailed records, track performance, and actively manage risk.
Tax implications for professionals:
- Winnings must be reported as business income.
- You can deduct reasonable gambling-related expenses (travel, entry fees, software, etc.) — but only against gambling income.
- You’ll be taxed at your federal and provincial marginal rates.
The Recent Court Case That Changed the Game
In Fournier-Giguère v. Canada (2025 FCA 112), the Federal Court of Appeal ruled that skilled poker winnings could be considered taxable business income. This case reinforces the CRA’s ability to classify organized, skill-based gambling as a business.
Investment Income From Winnings is Always Taxable
Even though the initial prize may be tax-free, any income you generate from investing that money is taxable.
For example:
- Deposit your $100,000 casino win into a savings account? The interest is taxable.
- Buy stocks with your lottery winnings? Dividends and capital gains are taxable.
Summary Table — How the CRA Views Gambling and Lottery Winnings
| Scenario | CRA Tax Status | Notes |
|---|---|---|
| Lottery winnings | Not taxable | Considered a windfall |
| Casual gambling winnings | Not taxable | Losses not deductible |
| Professional gambling income | Taxable as business income | Must report interest, dividends, and capital gains |
| Investment income from winnings | Taxable | Must report interest, dividends, capital gains |
Tips to Stay Compliant
- Know your status — casual vs. professional matters.
- Keep records if you gamble regularly, in case the CRA asks.
- Report investment income from winnings.
- Consult a tax expert if you earn consistently from skill-based gambling.
Why Speak to Accounting Montreal About Your Winnings
While most Canadians never pay tax on lottery or casual gambling winnings, the line between “hobby” and “business” can be blurry. At Accounting Montreal, we:
- Help you determine if your gambling activities could be considered taxable.
- Advice on reporting professional gambling income.
- Ensure your investment earnings from winnings are declared correctly.
Book a consultation today to make sure you keep more of your winnings, and stay on the right side of the CRA.
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