Casino winnings and tax in Canada: windfall, business income or US withholding

Canada does not have a line on the T1 return for casino winnings, and for most players that is the end of the story. A slot jackpot, a good night at the blackjack table or a lucky roulette spin is generally not income. But the rule is not a blanket exemption written into the Income Tax Act. It comes from how the Canada Revenue Agency (CRA) and the courts define income, and that definition has edges.

This guide walks through those edges: the windfall doctrine, the narrow test for a professional gambler, two Tax Court cases that tested it, the separate problem of US withholding tax, and the records that make any of this easier to prove.

The starting point: a windfall is not income

The CRA sets out its position in Income Tax Folio S3-F9-C1, Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime. Paragraph 1.2 states plainly that an amount received as a windfall is not subject to tax. The folio lists factors that point to a windfall, drawn from the Federal Court of Appeal decision in The Queen v. Cranswick (1982). Among them:

• the taxpayer had no enforceable claim to the payment;
• the taxpayer made no organised effort to receive it;
• the payment came from a source that is not a customary source of income for the taxpayer;
• there was no expectation that the payment would recur.

A casino win by someone who plays for entertainment ticks those boxes. You had no right to the jackpot before the reels stopped, you did not organise your life around earning it, and it is not how you pay your rent.

Lottery prizes get their own paragraph. Folio paragraph 1.16 says the amount or value of a prize from a lottery scheme is not taxable, unless the circumstances make it employment, business or property income. Paragraph 1.17 adds that no taxable capital gain or allowable capital loss results from disposing of a chance to win. The flip side matters: just as wins are not taxed, ordinary gambling losses cannot be deducted.

When gambling becomes a business

The exception is the professional gambler. Here the CRA itself concedes a lot of ground. Folio paragraph 1.12 notes that games of pure chance, like lotteries, lack the badges of trade, and paragraph 1.13 quotes the Tax Court: gambling, even regular, frequent and systematic gambling, is not by its nature generally regarded as a commercial activity except in very exceptional circumstances.

Paragraph 1.15 lists the criteria the CRA weighs, stressing that no single factor is conclusive:

1. Organisation. How businesslike is the activity: planning, staff, systems, record keeping?
2. Special knowledge or inside information that reduces the element of chance.
3. Intention. Is the person gambling for profit or for pleasure?
4. Extent. The number and frequency of bets.

Paragraph 1.14 summarises the cases where gambling has been held taxable: taxpayers who applied inside information, knowledge and skill. The folio's example is Luprypa, a pool player who, sober, challenged inebriated players to games for money. That is skill applied against opponents, not chance. For casino games where the house edge is built into every bet, it is hard to see how a player could reduce chance in the way the folio describes. Our explainer on RTP, volatility and hit frequency shows why the maths runs against the player over time.

Two cases that tested the line

The CRA has tried to tax heavy gamblers, and two decisions show how high the bar is.

Leblanc v. The Queen (2006 TCC 680)

Brothers Brian and Terry Leblanc bet on government-run sports lotteries (Pro-Line, Point Spread, Over/Under) from 1996 to 1999. They used a computer program one of them wrote, bought tickets in bulk from many retailers, negotiated volume discounts and paid up to 15 helpers to collect tickets. Their agreed net winnings were $2,761,544 each over the four years. Brian estimated they wagered $10 million to $13 million a year and lost about 95% of their bets.

The Minister assessed the winnings as business income. The Tax Court disagreed and allowed the appeals. The judge said betting on games of pure chance simply lacks the badges of trade, that managing or minimising risk is what characterises a business, and that the brothers' approach was risk-maximising. The court described them as compulsive gamblers continually trying their luck at a game of chance.

Duhamel v. Canada (2022)

Jonathan Duhamel won the 2010 World Series of Poker Main Event, about US$9 million, plus further winnings in 2011 and 2012. The CRA argued his poker was a business, pointing to his skill and to a book he published. On 21 June 2022 the Tax Court ruled in his favour: the winnings were not income under sections 3 and 9 of the Income Tax Act. The court found he was not sufficiently organised, did not consistently apply a risk-mitigation strategy and did not act as a businessperson would.

The lesson is not that a professional can never be taxed. It is that the CRA has to show something closer to a skill-based trade than to frequent, heavy play. A casino slot or roulette player is very unlikely to fall on the business side of that line.

What is taxable, even for a casual player

A tax-free win does not make everything around it tax-free.

• Income from the winnings. Once a jackpot sits in a savings account, a GIC or a brokerage account, the interest, dividends and capital gains it earns are taxed in the normal way.
• Annuity-style prizes. Folio paragraph 1.29 notes that annuity payments received as a lottery prize are brought into income under paragraph 56(1)(d).
• Running the game. Paragraph 1.11 confirms that profits from bookmaking or from operating a gambling establishment are business income.
• Crypto movements. If you play with cryptocurrency, the win may be a windfall but the crypto itself is a property you dispose of. That is a separate calculation, covered in our guide to crypto casino winnings and tax.

Winning in the United States: 30% withholding

Cross-border trips are where Canadians most often meet a tax bill on gambling. The rules here are American, so the amounts below are in US dollars.

Under IRS Publication 519, a nonresident alien generally owes a flat 30% tax on the gross proceeds from gambling won in the United States, collected by withholding at the casino. There is one useful exception in the same publication: no tax is imposed on nonbusiness winnings from blackjack, baccarat, craps, roulette or big-6 wheel. Slot machines, keno, lotteries and raffles are not on that list.

Canadians have an advantage most foreign visitors do not. The IRS instructions for the 2025 Form 1040-NR say that a resident of Canada who is not in the trade or business of gambling enters all gambling winnings on Schedule NEC, line 10a, and may deduct US-source gambling losses to the extent of US-source gambling winnings on line 10b. A net loss is not deductible. Lottery and raffle proceeds go in; the five exempt table games stay out.

A worked example

The refund only exists if you file the return and can prove the losses. Tax withheld and reported on a Form 1042-S is claimed as a payment on the 1040-NR (line 25g in the 2025 instructions). Filing generally requires a US taxpayer identification number; the IRS form to apply for an Individual Taxpayer Identification Number (ITIN) is Form W-7. Rules and line numbers change between tax years, so check the instructions for the year you won. Back home, the win itself is still a windfall for Canadian purposes, so there is normally no Canadian tax on it to offset.

Records worth keeping

Because casual winnings are not reported in Canada, many players keep nothing. That is a mistake in three situations: a US win you want refunded, a large deposit your bank asks about, and a CRA question about where money in your account came from.

• Win and loss log. Date, venue or site, game, amount bet, amount won. For US trips, this is what supports the losses you enter on line 10b.
• Casino statements. Download account histories from online casinos; land-based players' club statements serve the same purpose.
• Payout documents. Any Form 1042-S and the casino's payout slip for a US jackpot.
• Bank trail. Statements showing deposits and withdrawals that match the casino records. This also helps if a casino's own checks stall a payout; see why withdrawals sit pending.
• Investment records for whatever the winnings were put into, because that income is taxable.

Where Canadian players usually land

For a recreational player at a provincial site or a licensed casino, winnings are windfalls and losses are not deductible. The professional-gambler exception exists in the CRA's guidance but, as Leblanc and Duhamel show, the agency has struggled to apply it even to very heavy and skilled players. The places where tax genuinely appears are around the edges: income earned on the money afterward, crypto dispositions, and US withholding that you can partly recover through the treaty. Remember that gambling is for adults only (18+ or 19+ depending on your province), and if play stops being entertainment, provincial self-exclusion and support services exist for exactly that reason.

This article explains published rules; it is not personal tax advice. For a large win, a cross-border filing or anything resembling a gambling business, speak with a tax professional.

Frequently asked questions