Daily List of ALL things Equity Trading and Personal Financing for the Smart 2014 Canadian Investor.
Smart Investor Tip of the Day
Most times when we Canadians here about record breaking lottery winnings it is by an American citizen with takings of $300+ million. And we also know they were taxed on those winnings. The U.S. taxes lottery winnings. However, in Canada winnings are 100% tax free!
If a Canadian is fortunate enough to win a national lottery the funds are handed over as cash with no tax burden of any kind. But there’s a catch. Although gambling, wagering, and lottery winnings are indeed tax-free in Canada you are subject to be taxed if the Canadian Revenue Agency (CRA) deems you are in the business of gambling. Being in the business of gambling removes a certain element of chance and so must be taxed.
But with such a generous gift by the Canadian government one can’t help but think they are losing untold amounts of revenue by not taxing lottery/gambling winnings. A growing debate has always swirled around this topic and the government has tried on several occasions to calculate the amount of revenue from all types of winnings but has always fallen short because they could never conclusively figure out what that total number was. And then there is the complexity of how to deal with tax deductions. If they are to tax lottery winnings and gambling profits then surely one should receive some form of tax deduction for the costs incurred to earn such income (e.g., the cost of buying a lottery ticket).
Debt-ridden provinces like Ontario even tried unsuccessfully in looking towards taxing such winnings back in 2004. Although the federal government agreed to never re-enter the gaming/betting field again some 25 years ago in exchange for continuing to receive payments from provinces it is actually quite amazing that no province has yet to charge taxes on its own provincial lotteries. The idea of never being taxed on winnings has seeped so deeply into the Canadian consciousness that doing so now would be suicidal to an elected official’s career.
So as a smart investor always be aware that any winnings you may from a Canadian lottery or gambling system is not taxable; so you do not need to report it on your personal income tax forms. One of the benefits of being Canadian.