19 May So you won the jackpot…
Get to know the potential tax implications you are facing.
The Canadian and Ontario lotteries are ever-increasing, creating more temptation to buy into the pool and win it big. But what tax implications would you face if you became the lucky winner?
In Canada, lottery winnings are not taxable and are not required to be included as part of your annual income. However, additional income earned on the winnings (such as interest on investments) is considered taxable and must be reported to the CRA.
If you wish to share your fortune with friends and family members, they will not be taxed on the winnings since this is considered to be a gift and is not required to be reported as income. However, if additional income (such as interest) is earned on the gift, the same rule applies, and any additional income earned is considered taxable.
Gifting to friends or family members do not have income tax implications either. For example, a father can gift $10,000 to his son for the purchase of a new vehicle. This gift is non-taxable income for the son and, likewise, is not tax deductible to the father. The only situation where tax comes into play with gifting is when the gift is capital property (real estate or investments), at which point the property is deemed to be disposed of at its fair market value.
If you have any questions regarding the tax implications on your lottery winnings or general gifting rules, please contact your accountant for assistance.