Taxation of winnings in the United States and Canada

USA: what, when and how much

Threshold amounts and W-2G form

The organizer is obliged to give you Form W-2G and, in some cases, withhold tax on the following winnings: $1,200 + on slots/bingo; $1,500 + on keno; more than $5,000 at poker tournaments (after a buy-in deduction); from $600 if the winnings ≥300× bets (for example, on races/bets). These thresholds and reporting logic are enshrined in IRS instructions.

Withholding and rates

The basic federal withholding is 24% (regular "regular gambling withholding"). If the player did not report TIN/SSN, backup withholding is also applied 24%. In both cases, retention is calculated on "prize − bet/buy-in" when provided by the rules. Separately, state taxes are possible (for example, California/New York - yes, Nevada/Florida/Texas - no, because there is no state income tax).

US residents: declaration and losses

US residents declare all winnings as "other income" and can only count losses within the limits of line-item accounting winnings (Schedule A) if there are documents (tickets, receipts, casino reports). Even if the W-2G was not issued (for example, board games without a retention threshold), income is still subject to declaration.

Non-residents (and tourists): 30% and exclusions

By default, non-U.S. residents are subject to a 30% tax on American winnings; the casino usually withholds this amount. But there is an important exception to IRC § 871 (j): blackjack, baccarat, craps, roulette and big-6 wheel winnings are not taxed by non-residents (and, accordingly, without federal withholding). For slots, keno, poker, sweepstakes - the 30% rule is valid.

Canadians who won in the United States

Residents of Canada who played in the United States pay tax only in the United States, and this gain is not reflected in the Canadian declaration. In this case, you can return part/all of the retained in the USA if the documented losses in the USA for the year are equal or exceed the winnings (1040-NR with the application under the contract).

Canada: when winnings are taxed (usually never)

CRA Basic Rule

For residents of Canada and most non-residents, lottery and amateur game winnings are not subject to personal income tax - these are "non-source" receipts/" windfall." It is not the prize itself that becomes taxable, but the income for the prize (interest on the deposit, dividends, capital gains when investing the winnings).

CRA directly confirms: lottery winnings are not included in income, but interest/dividends from placed funds - yes. A similar logic applies to amateur casino/betting winnings: there is no tax if the game is a hobby, not a business.

When winnings become taxable in Canada

If a player acts as a business (consistency, bankroll management, selection of games as a commercial activity, sponsorship, etc.), CRA can qualify income as business income - then profit is taxed (and losses are taken into account according to business rules). Poker jurisprudence periodically clarifies the line between "hobbies" and "entrepreneurship."

Canada players, overseas winnings

If you are a resident of Canada and won abroad (for example, in the USA), in Canada this gain is not taxed and is not reflected in income. Tax withheld in the United States cannot be declared in Canada as foreign tax credit, because the income itself is not taxed in Canada; return is possible only through the American declaration (see above).

Quick checklists

If you won in the U.S. (player)

Save documents: W-2G, tickets, checks, player statements. This is necessary both for offsetting losses and for a possible return.

US Resident: Reflect all winnings in declaration; losses - only within the limits of wins in line counting.

Non-resident (including Canadian): check if the winnings fall under the exception § 871 (j) (board games); for the rest - a basic 30% deduction and the option of returning through the 1040-NR with the offset of losses.

If you won in Canada (player)

Resident of Canada: amateur winnings are not taxed; only interest/dividends/capital-gain on the invested prize are taxed.

US resident: The US taxes global income - you need to report to the IRS on American rules (there are no taxes in Canada). Compare with the rules of the state of residence. (See IRS general rules on W-2G/declaration.)

If you are an operator/site

In the US, meet the W-2G and 24% retention thresholds where required; maintain TIN control and payment logs.

In Canada: there is no tax for an amateur player, but the operator has general corporate/provincial obligations; Ontario has an iGO/AGCO market model (still "0" for player tax reference).

Frequent questions

Do I need to declare a small win in the USA without W-2G?

Yes I did. In the US, income tax is levied on all winnings; lack of form is not an exemption from reporting.

Can I reduce my US tax by the amount I lose?

Yes, but only within the limits of winnings and with evidence; for non-resident Canadians, it is often a tool to reclaim some/all of the 30% retention.

Is it true that non-US residents don't pay blackjack/roulette tax?

Yes, this is an express exception to § 871 (j) of the Internal Revenue Code.

In Canada, never pay at all?

Amateur - almost never. But a professional game (like a business) is taxed, and investment income for winning is always taxed.

USA: strict reporting, W-2G thresholds, 24% federal withholding on a number of winnings, 30% for non-residents (excluding exceptions for board games), plus possible state taxes.

Canada: for fans there is no tax on winnings, but income per prize is taxed; business game - taxable.

The main rule of thumb: collect documents and focus on the jurisdiction where the win was. This minimizes risks and often helps to legally reduce or recover withholding tax.