Let's say you hit a $1,000,000 jackpot at an online casino on July 13, the first question you might have is what happens to that money come tax season. The short answer for most Albertans is this: nothing. Gambling winnings are not taxable in Canada, but that's the short answer. The longer answer depends on how the Canada Revenue Agency (CRA) classifies you as a player.
Canada's tax rules on gambling apply uniformly at the federal level, meaning the rules below apply to you as an Alberta gambler the same way they apply everywhere else. There is no separate provincial gambling tax in Alberta.
Under Paragraph 40(2)(f) of the Income Tax Act, gambling winnings are classified as a "windfall" by the CRA which essentially means it's not considered income and are not subject to tax. This applies regardless of the amount won, the casino game you won on, or whether the win came from an online platform or a land-based casino like the River Cree Resort and Casino in Edmonton.
One exception does apply across the board: any interest or investment returns earned from your winnings are taxable at standard rates.
How Do I Know If I'm a Recreational or Professional Gambler?
So who says if you're a recreational or professional gambler, anyways? Well, there is no registration process or any specific threshold amount you need to win that'd classify you as one or the other in the eyes of the CRA. It comes down to how you gamble, not how much you win.
The CRA evaluates your entire situation and looks at factors like whether gambling is your primary source of income, whether you apply consistent skill or strategy, how frequently and systematically you play, and whether your overall conduct resembles that of a professional gambler, or a business. For most people, if you have a day job and play online casino games for entertainment, you're almost certainly a recreational gambler.
Recreational Gamblers
If the CRA considers you a recreational gambler, your winnings are completely tax-free. That is, like I stated above, you invest or save those gambling winnings and begin making money off it. At the end of the day it doesn't matter if you win $500 or $500,000; you're not required to report your winnings, and you cannot deduct any losses against other income.
Professional Gamblers
If gambling is your primary livelihood, or your "job", and your activity demonstrates business-like characteristics such as applying a consistent skilset, keeping organized records in a spreadsheet, and/or you have a clear profit motive, the CRA may classify your winnings as business income. At that point, standard federal and Alberta provincial income tax rates apply to your gambling profits, with combined rates ranging from 22% at lower income levels up to 48% on income above $370,220.
The tradeoff is that any professional gamblers can deduct losses and qualifying business expenses such as entry fees, travel costs for tournaments, and more. If you think this best describes you, it's best you speak with a tax professional.