Winning it big at a U.S. casino is exciting but the IRS automatically keeps 30 per cent of prizes won by non-residents. It seems a little unfair if you are not a U.S. citizen and are heading back home to Canada. Many casino winners want to know if they can get that money back. The short answer is maybe.
Under the Canada – U.S. tax treaty, you may be able to get a refund on some or all of the taxes paid to the IRS. But there is a catch. The treaty allows non-resident aliens to deduct gambling losses from winnings to determine the net amount that should be taxed.
This means you need to prove the amount of your gambling losses, and that is not something you always think to do before you hit it big. You must keep an accurate diary of losses and winnings and save all of your gambling receipts, tickets and statements. And you need to keep all supporting documentation such as wagering tickets, cancelled cheques, credit records, bank withdrawals and statements of actual winnings or payment slips provided by the gaming establishment. Casino frequent player cards are also an excellent proof of losses for the IRS.
Blackjack, baccarat, craps, roulette, dog or horse racing and Big-6 Wheel winnings are not taxable and have to be excluded from your calculations. But keno, slot machines, table games such as poker or wheel of fortune, bingo and lotteries are eligible expenses.
Only U.S. losses may be used to offset U.S. winnings. Losses can only be deducted from wagering gains in the same year and may be claimed on the non-resident tax form 1040NR. You will also need to apply for an Individual Taxpayer Identification Number (ITIN) in order to file your return. As a U.S. non-resident, there is no other way to obtain a legal refund of taxes.
So if you are planning a trip to the U.S. to play slots or poker, it may be worthwhile to keep a detailed diary and save your receipts just in case you win big. You may not want to add up your losses, but the records can pay off if you want to get some of your tax withholdings back.