Can I deduct gambling losses against gambling winnings on a Canadian tax return?

The default rule: winnings aren't taxable, so losses aren't deductible

For most Ontario players, the answer is straightforward — and perhaps surprising. Lottery winnings of any amount are generally not included in taxable income, unless the prize can be considered income from employment, a business, or property. The same logic extends to casino and online gambling winnings for recreational players: because lottery and certain other winnings are non-taxable in Canada, there is no taxable income against which losses could be offset. You can't deduct a loss from an income that was never reported in the first place. This is a foundational principle of Canadian tax law — the deduction question simply doesn't arise for the vast majority of casual players.

Note that income earned on gambling winnings — such as interest earned from investing those winnings — is taxable. So if you put your casino cashout into a GIC, that interest goes on your return. The original winnings do not.

The exception: when gambling becomes a business

The picture changes entirely if the CRA concludes that your gambling activities constitute carrying on a business. An individual's gambling activities may result in taxable business income or a business loss if the activities constitute a source of income — that is, carrying on the business of gambling. In that scenario, winnings become taxable business income, and losses become potentially deductible business expenses — the two sides of the ledger move together.

What tips the CRA toward treating someone as a gambling business? Determining the commerciality of gambling can be challenging; games of pure chance, like lotteries, lack the badges of trade to which the traditional tests of business activity can be applied. For skill-influenced activities, auditors look for things like systematic methods, significant time investment, a profit motive, and a degree of expertise that goes well beyond recreation. This is a high bar — and it's a determination made on the specific facts of each person's situation, not a self-designation. Profits derived from bookmaking or from the operation of any gambling establishment constitute income from a business, but that's a very different situation from a regular player, even a frequent one.

One more wrinkle worth knowing: in the case of 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. Gambling that falls short of "business" but above pure recreation sits in a grey zone — and the CRA's general position is that it remains non-taxable, meaning losses stay personal and non-deductible.

What this means for Ontario players specifically

Playing at an AGCO-registered online casino in Ontario doesn't change the federal tax analysis. The CRA's rules apply uniformly regardless of whether you're playing on a regulated Ontario platform or at a land-based casino. Ontario's regulated iGaming market — overseen by iGaming Ontario and the AGCO — governs licensing and consumer protection, not your personal tax obligations.

The bottom line: if you're a recreational player, your winnings are tax-free and your losses are not deductible. If you believe your situation might qualify as a gambling business, that's a genuinely complex determination — one that warrants a conversation with a qualified Canadian tax professional, not a self-assessment. The CRA's Income Tax Folio S3-F9-C1 is the primary technical reference on this topic and is worth reviewing (or having your accountant review) if the question is serious.

If gambling is causing financial or personal stress, ConnexOntario is available 24/7 at 1-866-531-2600.