Winning in the Other Country: How Canada and the US Tax Gambling and Lottery Winnings Across the Border

Canada and the United States treat gambling winnings differently at the root: Canada treats casual gambling and lottery winnings as windfalls that are not income, while the US treats all gambling winnings as taxable income. A Canadian who wins in Las Vegas pays US tax through withholding at 30% and can recover part of it under the treaty by deducting losses; an American who wins Lotto Max in Toronto pays no Canadian tax and full US tax. Professional gamblers are taxed as businesses in both countries.

Key takeaways

• Canada: casual gambling, lottery, and casino winnings are not taxable; losses are not deductible. Winnings become taxable business income only for a professional gambler (systematic, skilled, profit-oriented activity), which the CRA and courts find rarely.
• US: all gambling winnings are taxable income. US citizens and residents report them on the 1040 and can deduct losses up to winnings as an itemized deduction (90% of losses from 2026 under the 2025 tax law). Non-residents face 30% withholding on winnings from slots, keno, bingo, lotteries, and similar games; winnings from blackjack, baccarat, craps, roulette, and big-6 wheel are exempt from withholding.
• Treaty Article XXII(3): a Canadian resident can deduct US gambling losses against US gambling winnings to the same extent a US resident could, by filing a Form 1040-NR with records, and recover the withholding on the net amount.
• Canadian winning in the US: 30% withheld on a Form 1042-S; recoverable to the extent of losses on a 1040-NR; no Canadian tax on the winnings and no Canadian foreign tax credit (there is no Canadian tax to credit against).
• American winning in Canada: no Canadian tax or withholding; fully taxable on the 1040 as income; losses deductible if itemizing.

A Canadian who wins in the US

The casino or lottery withholds 30% of the winnings (above the reporting thresholds: $1,200 on slots and bingo, $1,500 on keno, $5,000 on poker tournaments and lotteries) and issues a Form 1042-S. Winnings from table games are not subject to withholding or reporting for non-residents. The withholding is a final tax unless the winner files.

Under Article XXII(3), a Canadian resident may deduct gambling losses incurred in the US against US gambling winnings, to the same extent a US resident could (losses up to winnings, or 90% of losses from 2026). The claim is made on Form 1040-NR with the winnings and withholding from the 1042-S and the losses documented (a casino win/loss statement, session records, receipts). The IRS refunds the withholding on the losses. A Canadian who won $10,000 on a slot machine (withheld $3,000) and lost $8,000 at the same casino files a 1040-NR showing $2,000 of net winnings, tax of $600, and a refund of $2,400. An ITIN is required.

In Canada, the winnings are not income and the losses are not deductible. No Canadian tax, and no foreign tax credit for the unrecovered US withholding, because Canada does not tax the winnings.

An American who wins in Canada

Canadian casinos and lotteries do not withhold on winnings paid to anyone, resident or not. A US citizen or resident who wins in Canada reports the winnings on the 1040 as gambling income (converted to US dollars) and may deduct losses up to winnings (90% from 2026) as an itemized deduction on Schedule A. No Canadian tax, no foreign tax credit. A US citizen living in Canada who wins a Canadian lottery owes full US tax on it with no Canadian tax to offset.

Professional gamblers

Canada taxes a professional gambler's net winnings as business income and allows losses and expenses; the bar is high (poker players who treat it as a business with systematic methods have sometimes been found to be professionals, but the CRA's default is that gambling is not a business). The US taxes a professional gambler on Schedule C with expenses deductible, but losses are still limited to winnings. A Canadian professional gambler with US winnings has effectively connected income if the activity constitutes a US trade or business, and files a 1040-NR accordingly.

Worked example

A Toronto couple spends a week in Las Vegas. He wins $15,000 on a slot machine ($4,500 withheld) and loses $11,000 across the trip on slots and video poker; she wins $6,000 at blackjack (no withholding) and loses $2,000.

• His winnings. 1040-NR with Form 1042-S; losses of $11,000 documented with the casino's win/loss statement; under Article XXII(3), net winnings $4,000; tax $1,200; refund $3,300. ITIN required.
• Her winnings. Table game; no withholding; no US filing required; no US tax.
• Canada. No tax on either; no deduction for either.

Official sources

"In general, nonresident aliens are subject to NRA withholding at 30% on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U.S. trade or business and is not exempted by treaty. However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States." — Internal Revenue Service, Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, https://www.irs.gov/publications/p515

"Losses incurred by a resident of a Contracting State with respect to wagering transactions the gains on which may be taxed in the other Contracting State shall, for the purpose of taxation in that other State, be deductible to the same extent that such losses would be deductible if they were incurred by a resident of that other State." — Canada-United States Tax Convention, Article XXII(3), https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997.html

Practitioner note

The treaty deduction for Canadian gamblers is real but requires records: the IRS wants a contemporaneous log or a casino win/loss statement, not a recollection. We tell clients heading to Las Vegas to use a player's card at every machine so the statement exists, and we file the 1040-NR for the refund every time the withholding exceeds a few hundred dollars.

See also: Planning a move? Start with the Canada-to-US tax checklist and browse every corridor by city, province, and state.

Next step

Fairlight prepares the 1040-NR with the Article XXII(3) loss deduction and ITIN application for Canadians with US gambling withholding. See cross-border pricing or book a call.