Are Lottery Winnings Taxable in Canada?
The short answer is NO. In Canada, lottery winnings are generally considered "windfalls" and are tax-free. However, there are important exceptions you need to know about.
The "Windfall" Rule
Unlike in the United States, where lottery winnings are treated as taxable income (often taxed at 24% or more), the Canada Revenue Agency (CRA) does not view lottery winnings as income.
This applies to:
- ✅ Lotto Max Jackpots
- ✅ Lotto 6/49 Prizes
- ✅ Daily Grand
- ✅ Scratch Tickets
- ✅ Princess Margaret Home Lottery
- ✅ 50/50 Draws
When Do You Pay Taxes?
While the prize itself is tax-free, what you do with the money afterwards is not.
1. Interest Income
If you put your $50 million winnings into a high-interest savings account, the interest earned is taxable income.
2. Investment Dividends
Any dividends or capital gains generated from investing your winnings in the stock market are subject to capital gains tax.
The "Professional Gambler" Exception
There is a rare exception where gambling winnings can be taxed: if you are considered a professional gambler.
The CRA looks at:
- The frequency of your play.
- Your specialized knowledge or skill (e.g., professional poker players).
- Whether gambling is your primary source of livelihood.
Note: Playing the lottery (Lotto Max, 6/49) is widely considered a game of 100% chance. It is virtually impossible to be classified as a "professional lottery player" by the CRA.
Summary Table
| Scenario | Taxable? | Why? |
|---|---|---|
| Winning the Jackpot | NO | Considered a windfall, not income. |
| Interest earned on winnings | YES | Passive income is always taxable. |
| Gifts to family | NO* | Canada has no "gift tax", but attribution rules may apply if gifted to minors/spouses for investment. |