Winnings Taxable?
Did a quick search and couldn't find anything. Was wondering if winnings at either a casino (B&M), or winnings on a pokersite online (Stars, Party etc etc) is taxable in Ontario. I know lottery and proline winnings are not, so just wanted to know if that is the case for this type of winnings too.
Comments
I think I read this online somewhere. I'd agree. But if you really wanna know for sure, ask someone in the field.
everything from your poker winnings (tournaments and ring games) to the blackjack table to the lottery tickets you buy are counted as incomes or deductable losses.
Consult an accountant or a tax lawyer.
Let's say "Joe" plays one poker tournament in his life and wins 150K. That same year, he makes 100K at his job. Is he a professional gambler for that year? No. Similarly, let's say "Ruth" wins the lottery, making millions. Is Ruth a professional gambler/lottery winner? Nope. And the government wouldn't want her to be, or Joe to be either. Because for every Joe and Ruth there are millions of people just like them who don't win. If the government decides that Joe and Ruth are professionals, they'd have to accept the fact that the people just like them--who are losing--are professionals as well, and these people just like them would then be entitled to write off all of their lottery expenses, poker losses, etc. What the government would make by taxing Joe and Ruth would be hugely subverted by what they would lose by having to give tax breaks to the millions like them, who lose consistently.
Furthermore:
Let's say player 'A' has been a winning poker player for three years. One year his poker winnings exceed his 'regular' income, one year his poker winnings match his regular income, and one year his poker winnings equal about half of his regular income. As was the case with Joe and Ruth, there are millions of players who play as often, and treat the game as seriously as player 'A'. But, 95% of them lose. The government could decide that player 'A' is a professional gambler, but they'd have to categorize all the losing players with the same playing habits in the same way, and again, honour countless tax write-offs from countless consistently losing poker players.
So you see, it doesn't have everything to do with how much you win or lose (although that is a part of it). More to the point, it has to do with this: does it look like you are in the business of gambling? To answer that question, the government takes several factors into account, which I won't get into here.Â
What it boils down to is this: if you think you might be a professional gambler, it's certainly worth getting a professional opinion on the matter. You don't want to have Revenue Canada auditing you, and end up paying interest on taxes you should have paid five years ago, or worse. At the same time, the government is very very careful about deciding exactly what it is that constitutes a 'professional gambler', for the reasons I have outlined in this post.
After consulting with my accountant, that was the main term brought up...primary source of income...that and "reasonable expectation of profit".
I never said it was a comparison...nor that you had to be making more at poker then your job for it to be taxable. And im not sure why you would say that "nullifies the school of thought."
10. Profits derived from bookmaking or from the operation of any gambling establishment (carried on legally or otherwise) constitute income from a business. In addition, an individual may be subject to tax on income derived from gambling itself, if the gambling activities constitute carrying on the business of gambling; see the decision of MNR v. Morden, (1961) CTC 484, 61 DTC 1266 (Ex. Ct.). The issue of whether or not an individual's activities are such that he or she can be considered to be carrying on a gambling business is a question of fact that can be determined only by an examination of all of the circumstances and the taxpayer's entire course of conduct. Although no one factor may be conclusive, the following criteria should be considered in making the determination:
(a) the degree of organization that is present in the pursuit of this activity by the taxpayer,
(b) the existence of special knowledge or inside information that enables the taxpayer to reduce the element of chance,
(c) the taxpayer's intention to gamble for pleasure as compared with any intention to gamble for profit as a means of gaining a livelihood, and
(d) the extent of the taxpayer's gambling activities, including the number and frequency of bets.
In order for any activity or pursuit to be regarded as a source of income, there must be a reasonable expectation of profit. Where such an expectation does not exist (as is the case with most hobbies), neither amounts received nor expenses incurred are included in the income computation for tax purposes and any excess of expenses over receipts is a personal or living expense, the deduction of which is denied by paragraph 18(1)(h). On the other hand, if the hobby or pastime results in receipts of revenue in excess of expenses, that fact is a strong indication that the hobby is a venture with an expectation of profit; if so, the net income may be taxable as income from a business (IT-33R2)
IF poker is your primary source of income, then you are playing in an organized fashion(Criteria A) knowing that you have an advantage in knowledge over your weaker opponents (Criteria
but that wouldnt be considered income or revenue...it would be considered windfall...you are confusing the two.
his livelihood is guaranteed by his job, so under criteria C, it would make it less likely for him to be considered a professional. add to that the frequency of his play (criteria d) probably would not surpass the frequency of his work.
LET ME MAKE A SLIGHT BACKPEDAL...I am still of the opinon, from my research, that if poker is your primary source of income, it would be extremely difficult to not be liable for taxes made from your profits. However, if poker is NOT your primary source of income, that does not preclude you from being liable for taxes on your profits.
In this tax year, however, I will be declaring poker income and paying the corresponding tax on it.
Let's look at some of the wording here:
a) "the degree of organization": anyone who plays at random times in random places and isn't closely tracking their results, etc. can be said to be putting NO organization into their hobby, regardless of how lucrative it may be, especially if they go for month(s) without playing at all.
b) "the existence of special knowledge or inside information that reduces the element of chance": Poker is a game of incomplete information. You can read all the books you want, but if you "feel" a guy is bluffing and you make the big call and are right or are wrong, there's no real special knowledge there. You are either right or you aren't, and you'll bust out or you won't, and a lot of that IMO is based on instinct. How observant are you? You're not "special"; you're observant. And as for "inside information", there's no such thing. As a winning hobbyist, you have access to no information that the rest of the world doesn't already have available to them, as well. There is no inside information to be had in poker, unless you're cheating the game. There are only judgement calls based on experience. Sure, odds do factor into play, but any monkey can calculate odds. The trick is being able to put your opponent on a hand accurately enough for you to be able to determine what you're up against before you calculate them.
c) "the taxpayer's intention to gamble for pleasure as compared with any intention to gamble for profit as a means of gaining a livelihood": I don't know about you, but my livelihood is not in poker. I play poker for fun, win or lose. The fact that I win more often than I lose doesn't change my intention, which is the key word in the phrasing of the original statement. I intend to win, of course. What scratch golfer, bowler, or darts player doesn't? If you're going to set about doing something, you might as well try to do it the best of your ability; otherwise, why bother trying? The root of it is that the intention hasn't changed: I play poker for fun. I work to make money. I may enjoy both activities equally (for example), and I may profit from both activities equally (for example), but one is work, and the other is a hobby. I could win or lose every tournament I entered next year and it really wouldn't make a difference; thus, I have no intention to "gamble for profit as a means of gaining a livelihood" (for example).
d) "the extent of the taxpayer's gambling activities, including the number and frequency of bets." I am certain that there are losing players who play FAR more often than some winning players do. Are these people considered professional gamblers? No. Should they seek help? Probably. Maybe... who knows? The point is that "the number and frequency of bets" has nothing at all to do with how successful or unsuccessful, or "professional", a poker player is. It may speak volumes about other aspects of their lives, but it shouldn't (and in a bubble, doesn't) determine who is a professional and who is not.
What if poker is your main source of income, but you don't mean it to be? Nor do you necessarily WANT it to be? You can see, I think, how these criteria fail to address such a situation. I've spoken with an accountant--as have you, I know--about all of this stuff. If you THINK you're a professional gambler, then you are. Pay your taxes. If you THINK you MIGHT be a professional gambler, then you might be. Talk to an accountant/tax lawyer. If you're pretty sure that you're a working man who plays poker and wins sometimes and loses sometimes, chances are pretty darn good that in Canada, that's exactly what you are. And with the vague and highly subjective criteria that Revenue Canada has provided for us, it would be difficult to prove otherwise.
As for "windfall" vs. "primary source", it's easy to confuse the two because "primary source" is so restrictive. I think that's why the words "primary source" never appear in anything that Revenue Canada has ever published regarding this matter (that I've seen, at least). My example still holds true: windfall and primary source can be the same thing for a year, if Joe wins one big poker tournament. Agreed that this single tournament win would be a windfall. But, at the same time, it is his primary source of income. What if he plays in another tournament (only one) the next year as well, and wins 150K that time, too? This is why the States has an "all or nothing" approach. They've gone with "all". There are simply too many exceptions and ambiguities to do it using the "sometimes" approach.
And, NOTHING precludes you from being liable on taxes from your poker income. Talk to an accountant or a tax lawyer to find out whether or not you should be.
Dave's example illustrates why the "primary source of income" criteria is not accurate. There are other factors to take into account, and he has, and has arrived at his conclusion. Or maybe his conclusion has arrived at him. In any case, these matters are for each individual to figure out, with some help from professionals, and when in doubt, with some help from Revenue Canada itself.
How could I possibly disagree with that. Its one giant grey mess.
All the same, i think ill just pay my taxes and avoid the need for soap on a rope.