The United States of America and Canada are geographically linked in multiple ways. Their history, customs, and attitudes toward online casinos and sports are strikingly similar. However, the fact that these two countries are fond of online gambling does not prove that they are on a similar footing in the online casino industry. Their judicial system on tax and tax recovery is what drives the knife in and cuts them apart. The United States of America and Canada are federations, with gambling laws varying significantly from state to state and province to province.
To be more explicit, while Canada does not enable hosting an internet gambling site, it does not prohibit its residents from engaging in offshore betting or online gaming in online casinos, such as the Jackpotcity casino. The United States, on the other hand, has a quite different viewpoint. But, what do these two neighbors have in common with one another in the world of online gaming, and where do they disagree? Continue reading to learn how Canadian gambling taxes compare to those in the United States.
Overview of Gambling Taxes In Canada and The USA
Everything begins to take entirely unforeseen turns at this point. No gambling-related activity can be taxed in Canada because it is not a reliable source of revenue and does not stem from employment, property, or any other lawful source. Gambling is not regarded as a legitimate economic venture in Canada, and most winners do not rely on their gambling winnings as their primary source of income. According to the law, a tax on this would be unfair and unreasonable.
As a result, Canadian residents are excluded from paying taxes on winnings from gambling activities such as horse racing, sports betting, lotteries, online casinos, and other games of chance. On the other hand, by law, you must record any interest you receive on your profits on a form known as a T5. Taxation applies to this interest. If it is revealed that you have not been paying taxes on this, you may face a fine.
Professional Gambling In Canada
However, if you are a professional gambler in Canada, whether you gamble online or offline full-time and make a career from gambling, you must file taxes. This is true whether you are playing offline or online. Professional gamblers, whether they specialize in poker, blackjack, or another form of gambling, are viewed as running their separate enterprises. This is subject to taxation in Canada.
Until now, the Canada Revenue Agency has been hesitant to perform audits and assessments of persons whose principal source of revenue is gambling. It is widely assumed that they operate a business, and commercial profits are subject to taxation. On the other side, the same company may incur massive losses, lowering its and other companies’ earnings.
Gambling Taxes In The US
In the United States, though, things are not the same. Any winnings you receive are subject to a regular tax rate of 25%. Even if you only make one dollar, you must report and pay taxes on that income. There is an opportunity to qualify for the exclusive discount given to persons whose primary income source is gaming. Nonetheless, further documentation must be completed, which may serve as the basis for additional taxes.
What are the profits from gambling?
Profits from gambling are subject to a separate tax regime in the United States. Gambling winnings of US citizens over $1,200, excluding those from blackjack, baccarat, craps, roulette, and the big-6 wheel, are considered taxable income under US law. Winnings from gambling acquired from non-resident aliens, such as Canadians, are subject to a thirty percent withholding tax at the collection point. For example, if you win $1,600, you will only receive $1,120 after the game. The more money you win at gambling, the more money you stand to lose due to withholding taxes.
These are the main differences and some points of convergence between the US and Canadian online gaming sectors. They each have their set of strengths and limits. Some people may argue that Canada would be better off without tax rules and that it should remain in its current state. However, the fact that your country’s laws will back you up in the event of any suspected fraud or other problem is a huge triumph for the US. Nonetheless, both countries are working hard to remove any obstacles that stand in their way. As a result, we are certain that tax rules will be regulated in Canada in the not-too-distant future.