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Are Lottery Winnings Taxed in Canada? What You Need to Know

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With millions of dollars at stake in lotteries like Lotto 6/49 or Max in Canada, it’s unsurprising that many dream of scoring a big win playing the lottery. 

But, after matching all the necessary numbers, will the government take a cut, or will you receive the entirety of the promised pot?

Luckily, in Canada, lottery winnings are never taxed. This article explains how taxes work for Canadian lotteries, including whether you can still share your lottery winnings tax-free. 

Key Takeaways

  • All forms of lottery winnings are never taxed in Canada, whether you win only a portion or the entirety of the prize pool. 
  • Lottery winnings, government monetary benefits, and amounts received from life insurance policies are part of non-taxable income in Canada. 
  • Smaller lottery winnings can typically be cashed out instantly or within a week, but winners of pools reaching hundreds of thousands or millions of dollars are usually scheduled for a personal interview to discuss the payment structure. 

Are Lottery Winnings Taxed in Canada? 

No, lottery winnings aren’t taxed in Canada. Whether you earn just a couple of bucks or millions of dollars from a lottery pot, your earnings don’t need to be reported to the Canada Revenue Agency

However, the CRA clarifies that although every cent you earn from the lottery is tax-free, the income your earnings generate when invested in accounts or stocks that accrue interest or dividends is going to be taxable. 

Moreover, in cases where you win annuity or “for-life” prizes, arrangements are typically made by the lottery organization for the taxable portion of your prize. 

Are 50/50 Winnings Taxable in Canada? 

50/50 winnings are not taxable in Canada, just like solo won winnings. And the same goes for any percentage you win in the lottery.

Once you cash out your lottery in-store or at the prize office, you can keep the full amount without claiming it in your income tax return. 

Why Are Lottery Winnings Not Taxed in Canada? 

Lottery winnings are not taxed in Canada, as they’re part of the non-taxable income category, alongside amounts you may earn from government monetary benefits, life insurance policies, and gifts.

These types of earnings are considered financial windfalls or unexpected earnings that typically don’t reflect a person’s regular annual earnings.

Can You Gift Lottery Winnings Tax-Free in Canada? 

Yes, gifting lottery winnings is still tax-free in Canada. The amounts others receive will be considered a “gift” from you, which, as mentioned, also falls under non-taxable income in Canada. 

How Long Does it Take to Recieve Lottery Winnings in Canada? 

For lottery winnings amounting to less than $1,000, you can instantly receive your prize after claiming it at any local lottery card distributor or the prize office. 

However, amounts bigger than $1,000 must be claimed online at the lottery website. 

Depending on the exact price amount you win, you may be mailed a cheque and receive your winnings as early as 5 days or be scheduled for an interview, which would determine exactly how long you need to wait to receive your winnings. 

FAQs 

Are lottery winnings taxed in the USA? 

Yes, every form of lottery winnings is taxed in the USA. Whether you’re winning cash, events, or high-ticket items from gambling, the market value of your winnings will typically be subject to American federal and state taxes.

Can a non-resident win the lottery in Canada?

Yes, non-residents can still play and win the lottery in Canada, but limitations may apply. For example, the OLG only allows Ontario residents to play on its online platform, so those residing outside the province or the country cannot play.

How are lottery winnings paid out in Canada?

Relatively smaller lottery prizes are typically paid in lump sum in Canada. However, once you step into winning bigger pools of money, you may be offered the option to get paid monthly or weekly instead of receiving the entire amount at once.

Has anyone ever won cash for life in Canada?

Yes, there have been winners of Cash for Life in Canada. However, many of them have opted to get paid in a lump sum instead of staggered amounts.

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Author

Gravatar for Enoch Omololu, MSc (Econ)
Enoch Omololu, MSc (Econ)

Enoch Omololu, personal finance expert, author, and founder of Savvy New Canadians, has written about money matters for over 10 years. Enoch has an MSc (Econ) degree in Finance and Investment Management from the University of Aberdeen Business School and has completed the Canadian Securities Course. His expertise has been highlighted in major publications like Forbes, Globe and Mail, Business Insider, CBC News, Toronto Star, Financial Post, CTV News, TD Direct Investing, Canadian Securities Exchange, and many others. Enoch is passionate about helping others win with their finances and recently created a practical investing course for beginners. You can read his full author bio.

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