For many years the Canada Revenue Agency has said that individuals may have to pay tax on gambling winnings “if the gambling activities constitute carrying on the business of gambling.”Roughly this means that tax is dependent on how often one plays and what percentage of your total income is derived from gambling. However, the CRA has now released a technical interpretation in response to an inquiry from an online poker player.
The individual said that he learned how to play by watching videos and then started playing himself online.
At first he just won small amounts but his winnings soon grew and he started spending more time playing online poker.
Gambling profits are considered “windfalls” rather than a source of income. However, the CRA has now listed a number of factors which affect this such as whether the individual had a specific expectation to receive the particular payment, whether it was expected that the payments would recur and whether the payment was earned as the result of a pursuit of profit.
The CRA said in some cases gambling winnings can be considered as taxable income from a gambling business and that each case must be decided on its own facts. The agency concluded that if the main source of an individual’s income is online gambling then it constitutes taxable business income.