Are online casino winnings taxable in Alberta?

The first legal online casinos are now live in Alberta, giving eligible users a wide range of licensed operators to discover and enjoy. In fact, around 50 brands are registered to launch in the province today, July 13. While players have the chance to win real money playing casino games online, many may wonder if they need to prepare to pay taxes on those winnings. The answer to that is relatively straightforward.

The short answer, for the most part, is simple: No.

According to the Income Tax Act, specifically paragraph 40(2)(f), a taxpayer's capital gain or loss from the disposition of a chance to win a prize or bet or a right to receive an amount as a prize or as winnings on a bet is nil.

Put another way, casual winnings from the likes of Alberta online casinos are classified as windfalls and are generally tax-free in Canada, meaning users do not need to report them as income on their tax returns. Similarly, residents cannot claim capital losses if they lose money.

While taxation doesn't occur directly on winnings from recreational play at real money online casino Canada platforms, there is something that Albertans need to keep in mind.

Say a user withdraws their online casino winnings and then deposits them into a savings account or invests them in a stock. Any interest earned from that investment must be declared and taxed.

In fact, all additional earnings made from investing must be declared on a T5 or T3 slip as well as on the T5013 form and shown as part of residents' investment income. Depending on your income level, it could be taxed at a rate ranging from 15% and 33%. Not declaring these earnings could result in prosecution and fines.

There is one key aspect of Canadian tax law that users should be aware of, and it involves if residents say they are recreational or professional gamblers.

Obviously, there's no official form or process to declare yourself as such, or even a certain threshold of amount won that pushes you into the professional tier. Rather, it's more about how users are gambling.

The Canada Revenue Agency (CRA) examines factors such as if gambling is an individual's primary source of income, how frequently they gamble and whether their overall approach resembles that of a professional or business. When designated as a professional gambler, residents must pay taxes on their winnings.

To put Albertans' minds at ease, however, if they have a normal day job while engaging with legal online casinos as a form of entertainment during their downtime, the CRA more often than not will view them as recreational gamblers.

Bottom line: this information is provided for general informational purposes only and does not constitute tax, legal, or financial advice. If users have any questions regarding taxes on gambling winnings, they should consult with a tax professional for advice. 

Please play responsibly. 18+. Alberta only. Gambling Problem? Call GameSense at 1-833-447-7523 or visit https://gamesenseab.ca/.

Grant Lucas