Canada Lottery Tax Guide: Do You Pay Taxes on Winnings?

Every time a headline announces a massive lottery win in Canada, one of the first questions that arises is: “How much will they actually take home after taxes?”

It’s a valid concern – after all, in many countries like the U.S., a significant portion of lottery prizes can be eaten up by tax authorities.

But here’s the twist: in Canada, most lottery winnings are not subject to tax.

This leads to a common misconception – especially among those familiar with U.S. tax rules – that “all lottery winnings are taxed.” In Canada, this simply isn’t true for casual players.

Most prizes, whether from Lotto Max, 6/49, or even scratch cards, are considered non-taxable windfalls by the Canada Revenue Agency (CRA).

To put it in perspective, in 2022, Canada’s top lottery organizations – Ontario Lottery and Gaming Corporation (OLG), Western Canada Lottery Corporation (WCLC), and Atlantic Lottery Corporation (ALC) – awarded over C$3.5 billion in prizes to players.

That’s billions of dollars flowing into the hands of everyday Canadians – without a tax bill attached.

Are Lottery Winnings Taxable in Canada?

No, lottery winnings aren’t taxable in Canada, but there are certain conditions that make them tax-free. If the winnings from a lottery aren’t considered as income or capital gains, and the players are playing only as a hobby or for entertainment, then it does not involve any tax.

According to the Canada Revenue Agency (CRA) and the Income Tax Act, almost all lottery prizes are considered “windfalls,” a type of financial gain that is not subject to income tax.

But there are certain exemptions. If the prize is tied to:

1. Your job (e.g. employment bonus via lottery)
2. A business activity
3. A property income scheme
4. An achievement prize (like academic or performance-based)

then it could be taxable.

Note – If a lottery retailer receives a commission for selling a winning ticket, that commission is taxable income.

Legal References:

• CRA’s Income Tax Folio S3-F9-C1 explicitly states that “lottery winnings are not subject to tax” unless the prize can be considered income from employment, a business, or property.
• The Income Tax Act (Section 3) specifies that only income from a source (like employment, business, or property) is taxable. Windfalls, such as lottery winnings, do not meet that definition.

Practical Implication: If you win C$1 million in Lotto Max or scratch off a C$10,000 prize on an instant ticket, you keep every dollar—there is no federal or provincial tax withheld, and you don’t need to report it as income on your tax return.

Quick Recap:

Type of Win	Taxable?	Notes
Lotto Max / 6/49	No	Non-taxable windfall
Scratch Card Prizes	No	Non-taxable windfall
Daily Grand	No	Even C$1,000/week for life is tax-free
Charitable Raffle Winnings	No	Still a windfall if legally registered

What Counts as a Tax-Free Lottery Win?

In Canada, most lottery winnings are tax-free, as long as they’re not connected to a job, business, or investment. Here are some common examples of winnings that don’t trigger any tax:

Examples of Tax-Free Winnings:

• Lotto Max, Lotto 6/49
  These are national lottery games with large jackpots. Any amount you win is yours to keep—no tax is taken.
• Scratch Cards
  Whether it’s a C$5 win or a C$100,000 prize from an instant game, you don’t owe any tax on it.
• Daily Grand
  Offers C$1,000 a day for life or a lump sum. Both payout options are tax-free.
• Provincial Draws
  Includes games like Quebec Max, Atlantic 49, and others run by regional lottery corporations. These follow the same tax-free rules as national games.
• Raffles by Registered Charities
  If the raffle is run by a registered charity, the winnings are also tax-free—as long as it’s a game of chance and not tied to work performance or business activity.

Do You Pay Taxes on Interest Earned from Lottery Winnings?

While lottery winnings themselves aren’t taxed in Canada, any interest or income you earn from those winnings is taxable.

So, if you win C$1 million and let it sit in a savings account or invest it somewhere, the prize money stays tax-free, but the earnings from it don’t. That includes interest from a bank, dividends from stocks, or rental income if you buy a property with the winnings.

Example:

If you win C$250,000 and put it in a savings account that earns 4% annually, you’ll make C$10,000 in interest over the year.
That C$10,000 has to be reported as income and is subject to tax—just like interest from any other savings.

So, in short:

• Winnings? Not taxed.
• Money earned from winnings? Taxed.

What Happens If a Non-Resident Wins a Canadian Lottery?

This is a grey area. If you’re visiting Canada and buy a lottery ticket while you’re in the country, and then win, you can claim the prize tax-free in Canada.

However, your home country might not treat it the same way.

For example:

• U.S. citizens must report and pay federal taxes on worldwide income—including lottery winnings from Canada.
• Countries with stricter tax codes may impose local tax obligations on lottery income, even if it was tax-free in Canada.

Bottom line: Canada won’t tax non-residents, but your own government might.

What About Business Use of Lottery Winnings?

Some players might be tempted to invest winnings into a business or treat lottery play like a profession. This complicates things:

• If you habitually buy tickets as part of a calculated strategy and write off expenses, the CRA might argue it’s a business.
• If you sell tips, pool access, or subscription-based lottery predictions, your income from those services becomes taxable—even if the lottery win isn’t.

CRA does not tax gambling as income unless there’s a pattern of business-like behaviour. So if you’re trying to profit off the game beyond winning, taxes can enter the picture.

Can You Stay Anonymous After Winning?

In most Canadian provinces, anonymity is not guaranteed. Lottery corporations typically require winners to:

• Reveal their identity publicly
• Participate in a media release or photo op
• Share at least minimal personal details

This is done to maintain transparency in the lottery process and prevent fraud. However, some winners have successfully gone to court to keep their identities private—though this usually requires proving legitimate safety concerns.

Editor’s Verdict

Canada’s tax policy on lottery prizes is straightforward and clearly more generous than many other countries, especially the U.S. But it’s also easily misunderstood.

The key takeaway: If you’re a casual player, your winnings are safe from the CRA. You don’t have to report them, and there won’t be any deductions.

However, if you turn lottery gaming into a business, accept employment-related prizes, or earn income from investing your winnings, the rules shift—and taxes kick in.

It’s not about the size of your prize, but the source and context.

Always keep a record of where your money is coming from, especially if you plan to invest or generate income from your prize.

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