The Taxation of Winnings from Poker and Other Gambling.
Gambling losses are indeed tax deductible, but only to the extent of your winnings and requires you to report all the money you win as taxable income on your return. The deduction is only available if you itemize your deductions. If you claim the standard deduction, then you can't reduce your tax by your gambling losses.
In Canadian income tax law, winnings from gambling are taxable when they constitute “income from a source.” What is not clear is the basis for determining when, where, and how winnings from gambling activities can amount to “income from a source.” In light of recent decisions of the Tax Court of Canada, notably in Leblanc and Cohen, this article examines the court’s treatment of this.
Gambling losses are entered on line 10b, with net gambling income (zero if negative) entered on line 10c. If you have winnings from blackjack, baccarat, craps, roulette, or big-6 wheel, and the casino gave you a Form 1042-S ( Foreign Person’s US Source income subject to withholding) showing that tax was withheld, enter these winnings in column d of line 10, with a tax rate of zero%.
The Canada Revenue Agency (CRA) states that, “an individual may be subject to tax on income derived from gambling itself, if the gambling activities constitute carrying on the business of gambling.”. This suggests that any person who partakes in gambling as a business exercise is therefore liable to pay taxes. It’s not clear how we should differentiate the casual gambler from one.
However, under the Canada-U.S. Income tax treaty, Canadian residents can claim their U.S. gambling losses up to the amount of U.S. gambling gains for the year using the same rule that would apply to U.S. citizens and residents. To claim a refund of taxes withheld from gambling gains, you must file form 1040NR, U.S. Non-resident Alien Income Tax Return.
Foreign nationals' gambling winnings from blackjack, baccarat, craps, roulette, or big-6 wheel, are exempt from income tax. Residents of Canada If you are a resident of Canada who is not engaged in the trade or business of gambling, you should report all gambling winnings other than winnings from blackjack, baccarat, craps, roulette, or big-6 wheel.
Gambling by income: The percentage of taxable returns per income bracket reporting gambling winnings. Percentage of All Reported Gamblers by Income Bracket. Admittedly, this chart is more confusing. We’re showing the percentage of all tax returns each bracket represents and contrasting it with the percentage of all taxed winning gamblers.