Gambling Losses Tax Deductible Canada
- Gambling Losses Tax Deductible Canada 2019
- Gambling Losses Tax Deductible Canada 2020
- Gambling Losses Tax Deductible Canada Income
- Gambling Losses Tax Deductible Canada Tax
The IRS views winnings from gambling as taxable income, but did you know that you’re allowed to deduct gambling losses, too? While losing money at a casino or the racetrack does not by itself relieve your tax burden, it can reduce taxes owed for your other winnings, ultimately saving you money.
This means you can’t take the standard deduction for your filing status, which often amounts to more than a taxpayer’s itemized deductions. You’re allowed to deduct losses only up to the amount of the gambling income you claimed. So if you won $2000 but lost $5,000, your itemized deduction is limited to $2,000. You can't reduce your gambling winnings by your gambling losses and report the difference. Rather, you report the full amount of your winnings as income and claim your losses (up to the amount of. This section provides information on capital losses, and on different treatments of capital gains that may reduce your taxable income. Consult our Summary of loss application rules chart for the rules and annual deduction limit for each type of capital loss. You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040 or 1040-SR) PDF and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return.
How to know if you can deduct your gambling losses
Gambling loss deductions save you money by reducing your taxable income. But there’s a trick to this—you can’t claim gambling losses that exceed your winnings, as losses are inextricably linked to your winnings for tax purposes. If you have no winnings to claim, you can’t deduct your losses.
As an example, let’s say that in a given year you went gambling twice, winning $6,000 in one instance, but losing $8,000 in another. In this case, you can only deduct $6,000 from that $8,000 loss. The remaining $2,000 in losses can’t be carried forward or written off. Conversely, if you won more than you lost, you’d owe taxes on the difference between your winnings and losses as “other income”—but at least those taxes would be reduced.
(If you’re a full-time, professional gambler the requirements are different: you will report your earnings like they have resulted from a business, as self-employed income).
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How to claim gambling losses
Deductible gambling losses can result from online casinos, poker games, sports betting, lotteries, prize draws, horse and dog racing, and even your office fantasy sports pool. To report any of these gambling losses, you’ll be required to itemize your deductions. This makes sense if the total of all your itemized deductions exceeds the standard deduction ($12,400 for taxpayers who are single or are filing separately from their spouse). If you claim the standard deduction, you don’t get the opportunity to reduce taxes for winnings owed by deducting gambling losses.
Keep in mind that you must be able to substantiate any losses you’re claiming, which means you’ll need to keep records of your gambling.
Track your winnings and losses
You can’t just say “I lost a bunch of money gambling” to the IRS. They require you to provide records of your winnings and losses to back your claim. Therefore, you should keep track of:
- the date and time of your gambling session
- the type of gambling
- the name and location of the gambling venue
- the people you gambled with
- how much you bet, won and lost
You should also keep credit cards statements, payout slips, receipts, tickets, bank withdrawal records, and statements of actual winnings. Other documentation can include:
- Form W-2G (typically given or mailed to you by casinos after a big payout)
- Form 5754 (a form for when you’re part of a group that earns money through gambling; you might see one of these if you and your co-workers are cashing in a winning lottery ticket)
Do you or someone you know need help with a gambling problem? Call the National Problem Gambling Helpline Network (1-800-522-4700).
A Toronto man trying to write off casino and racetrack losses against his income tax bill has gambled and lost at Canada's Federal Court of Appeal.
Giuseppe Tarascio claims that gambling is how he earns the bulk of his income. He filed tax returns for several years, claiming both his wins and losses.
By day, Tarascio is a technician with Bell Canada. But on evenings and weekends, he responds to what he claims is his true calling: horses, slot machines, casino games and lotteries.
He claims to have won tens of thousands of dollars. For years he claimed those winnings as income, but he also deducted his losses and expenses.
In his income tax returns for 2002 and 2003, he deducted from his gambling winnings his losses and associated expenses: $40,933 in 2002 and $56,000 in 2003.
But Tarascio’s luck ran out when the Canada Revenue Agency (CRA) stepped in and disallowed those deductions.
Tarascio objected and went to tax court. He presented his books and records, but lost there too.
No 'systematic method,' court rules
Hoping his courtroom losing streak would end, Tarascio pushed his luck further, taking his case to the Court of Appeal.
He claimed that his degree in mathematics — coupled with his experience in probability theory — gave him the expertise to register his gambling as a business.
But the court turned him down, saying Tarascio had no 'systematic method' for gambling and had spent no time practising his skills. He was also required to pay court costs of $1,000.
Gambling Losses Tax Deductible Canada 2019
It didn't help that Tarascio admitted that win or lose, it was really the thrill that drove him to the tables.
Colin Campbell, who teaches tax law at the University of Western Ontario, said the test of whether or not gambling losses are a legitimate writeoff depends on whether it’s a personal or commercial activity.
Gambling Losses Tax Deductible Canada 2020
'That's the dividing line,' said Campbell. 'And in the case of gambling, the courts have generally found that gambling is predominately a personal activity.'
Gambling Losses Tax Deductible Canada Income
Tarascio didn't want to talk about the decision when contacted by CBC News.
Gambling Losses Tax Deductible Canada Tax
Asked if he planned to appeal to the Supreme Court, he said no. That would require a lawyer, but Tarascio said he can’t afford one.