Recently I was asked if winnings from online poker were taxable, apparently a common question since more and more Canadians are now playing poker online – I actually didn’t know what to say. It was time to find out how winnings in Canada are taxed.
Surprising it comes down to whether or not your gambling is carried out as a business, a professional gambler or just as a gambler. Sounds confusing? It is!
Since the income you use to play poker has already been taxed the winnings are enjoyed strictly as winnings. If your winnings are carried out on a casual poker player and casually wins there is no tax consequences. Easy enough to understand.
It changes if the winnings are derived from business income. When I called Canada Revenue there was actually no black and white answer. There is no example offered to show how winnings from online poker were taxed.
The difference was that winnings would be be taxed when income to play online poker was used from business income that had not yet been taxed. Sounds odd, yes it would mean that your income source would be derived from income that you hadn’t yet been taxed on. These days more and more people are earning income first before paying any tax so as hard as it would be to pinpoint as to how much would be taxable, it is possible. An example of business income would be rental income, royalties, interest earned or even as an athlete. Sounds a little risky but with today’s online forums and poker players skillful knowledge and various software strategies, again it could be possible.
What about a professional gambler? Again this would be hard to determine whether you are a professional gambler. If you spent more than 25- 35 hours online each week playing poker you might find that your new profession is a gambler and your winnings are taxable. My question is where do you draw the line from a casual poker player or a professional poker player and how would Canada Revenue establish a professional to a casual player. After all if one looses they could theoretically claim the losses, just as a business could off set the losses against other sources of income.
Now knowing the taxation and how the Income Tax Act handled the around online poker winnings I quickly viewed “Join William Hill Online Poker Canada” a Canadian online poker site to see what they had to offer. There it was in the comfort of my own home – online poker!
Now I can see why this common question of online poker winnings and rules around Canadian taxation is popular.