Yes. However, in some cases, Canadians can get a refund on taxes withheld in the U.S. by filing a U.S. non-resident tax form.

What winnings are taxed?

Initially, Canadians will be charged 30% U.S. income tax on most gambling winnings earned while in the United States. The 30% tax is withheld at the time it is won.

Winnings refer to cash or other prizes. Winnings from the following games are generally subject to the 30% withholding tax:

• poker tournaments
• slot machines
• betting pools
• game shows
• casino games
• lotteries
• bingo
• sweepstakes
• raffles
• horse or dog races
• off-track betting
• US winnings from online activities

Can you be refunded the tax that is withheld?

If you had 30% tax withheld from lottery or gambling winnings in the US, there are two ways you may recoup some or all of the tax:

• • You have US gambling losses to offset some or all of the winnings, or
  • Tax was withheld from winnings that are exempt

1. Reduce tax owed by reporting loses

Canadian residents can reduce the amount on which 30% is owed on their winnings by reporting any gambling losses they have incurred. This is done by filing a U.S. 1040NR U.S. Non-resident Alien Income Tax Return in the following year for a refund. You must be able to prove you lost money. If you did not lose any money, you will be subject to the 30% on all winnings and not eligible for a refund.

To be eligible to file a 1040NR, a person must:

• • not be a U.S. Citizen
  • must not be a Green Card Holder or ever applied to be one
  • cannot live in the United States, and
  • not have any other U.S. source income

2. Tax was paid on winnings from games that are exempt from the tax

Some winnings are exempt from the 30% withholding tax:

• blackjack
• baccarat
• craps
• roulette
• Big-6 wheel winnings

You may be eligible for a refund if tax was withheld from winnings on these exempt games. Therefore, it is important to know if the winnings shown on the tax slip issued by the payer fall under an exempt category.

Again, to obtain a refund you must file a U.S. 1040NR tax return. To be eligible for a refund you will have to provide proof of money won and lost, such as:

• casino names, dates and amounts won or lost
• lottery names, dates, and unredeemed tickets
• machine numbers of slot machines
• records of the horse/dog races, that include the details and the results of each bet,
• payment records from the racetrack
• any other proof of your losses, e.g., cancelled cheques, credit card receipts

How do you know if tax was withheld?

When tax is withheld on your winnings, you will receive a tax slip called a 1042-S “Foreign Person’s US Source Income Subject to Withholding” that reports the amount you won and the amount of tax withheld. The form may also include an Individual Taxpayer Identification Number or ITIN which you are given the first time you file a 1040NR tax return return. This form must be attached to your tax return.

For more information, and to learn if you may be exempt from paying U.S. federal income taxes or are eligible for a refund, visit the Internal Revenue Service (IRS) or consult with a tax lawyer.

								
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