Are lottery winnings taxed in Canada? What the CRA says

No, lottery winnings are generally not taxed in Canada, whatever the size of the prize. The Canada Revenue Agency lists lottery winnings "of any amount" among the amounts you do not report on your return. What does get taxed is what the money earns after you win it, and a few situations change the answer: a prize that is really employment or business income, an annuity-style prize, a ticket bought in the United States, and money you pass on to family. This guide covers each one with the official source.

This is general information, not tax advice. If you win a large prize, speak to a tax professional before you move the money.

The short answer

• A Canadian lottery prize is not taxable. You do not report it on your return, however large it is.
• Income it earns later is taxable. Interest, dividends and capital gains from investing the prize are reported in the normal way.
• Some prizes are income. A prize that counts as income from employment, a business or property, or a prize for achievement, is not covered by the windfall rule.
• US lottery prizes are taxed in the US. The United States taxes lottery winnings paid to non-residents at 30% unless a treaty or other rule reduces it.

Why lottery winnings are tax-free in Canada

Canada taxes income from a source, such as a job, a business or investments. A lottery prize is a windfall: you did nothing to earn it beyond buying a ticket. The CRA's page on amounts that are not reported or taxed says you do not have to report "lottery winnings of any amount, unless the prize can be considered income from employment, a business or property, or a prize for achievement."

The Income Tax Act also closes the capital gains route. Paragraph 40(2)(f) says a taxpayer's gain or loss from the disposition of "a chance to win a prize or bet" or "a right to receive an amount as a prize or as winnings on a bet," in connection with a lottery scheme, is nil. Selling a share of a ticket, or assigning your right to a prize, does not create a taxable gain.

The lottery corporations say the same in plain terms. OLG's winners FAQ answers "Are lottery prizes taxed?" with "Generally speaking, lottery wins in Ontario are not taxed." Because federal rules decide what counts as income, the answer does not change from province to province. Our broader guide to whether gambling winnings are taxed in Canada explains where the windfall rule stops for casino and poker players.

What is taxable after you win

The prize is tax-free on the day it lands. Everything it produces afterwards is ordinary income or capital gains. The CRA states it directly: "any interest that you earn when you invest lottery winnings must be reported on your return."

A simple illustration with round numbers, not a forecast:

The bank, not the lottery corporation, will issue the tax slip for the interest. If the prize is large, the investment income alone can move you into a higher bracket, which is the usual reason winners hire an adviser.

When a prize is not a windfall

The CRA's exception covers prizes that are really income from another source:

• Employment: a prize your employer gives you because of your job, such as a draw that only staff can enter, can be a taxable benefit.
• Business or property: if running lottery pools or reselling tickets is a business for you, the profit is business income.
• Prize for achievement: a prize for what you did in your field, rather than a random draw, is not a lottery windfall.

Buying a ticket at the corner store and winning is none of these. The exception matters for unusual arrangements, and those are worth checking before you claim.

Annuity prizes such as DAILY GRAND

DAILY GRAND's top prize is "$1,000 a Day for Life" and the second prize is "$25,000 a Year for Life," according to OLG's odds and payouts page. OLG notes that a lump sum equivalent would be shared among the eligible holders of winning tickets for that prize.

Lifetime payments are not entirely the same as a single cheque. OLG's FAQ says that for annuity prizes, "arrangements are made by OLG or the ILC (dependent on the lottery game) for the taxable portion of the prize." In other words, an annuity can include an investment element, and the lottery corporation handles how it is structured. If you win one of these prizes, ask the prize centre how the payments are set up before you choose between the annuity and a lump sum.

Lottery pools and group wins

Office and family pools are common, and they are where most disputes and tax confusion start.

OLG explains that "a group claim is submitted by two or more people who played the lottery together and won a prize," and that "each person has a claim to a share of the prize which must be declared to OLG." Group claims use one Lottery Prize Claim Group List.

Declaring every member also keeps the tax picture simple. A declared share is that member's own prize. If one person claims the whole prize alone and then pays the others, those payments are gifts from the claimant, and the income rules for gifts to a spouse or a minor, explained below, can then apply. A signed list of who paid for each ticket, and a group claim that names everyone, avoids the question.

Giving part of your winnings away

Canada has no gift tax, and the CRA lists "most gifts and inheritances" among amounts the recipient does not report. You can give cash from a prize to family or friends without either side paying tax on the gift.

The catch is the income the gift earns later. Under section 74.1 of the Income Tax Act, if you transfer or lend property to your spouse or common-law partner, the income from it "is deemed to be income or a loss, as the case may be, of the individual for the year and not of that person." Section 74.1(2) does the same for gifts to a person under 18 who does not deal with you at arm's length, or to a niece or nephew under 18, until the year they turn 18.

So if you give your spouse $200,000 from your prize and they invest it, the interest is still taxed in your hands. Cash gifts to adult children, siblings or friends are not caught by section 74.1.

Winning a US lottery

US prizes are a different matter. Canadians who buy Powerball or Mega Millions tickets in the United States can win, but the US taxes the prize.

Section 871 of the US Internal Revenue Code imposes "a tax of 30 percent" on certain amounts received from US sources by a nonresident alien. The exemption in section 871(j) covers only wagers placed in "blackjack, baccarat, craps, roulette, or big-6 wheel," so lottery prizes are not exempt. The IRS lists lotteries as gambling income, and some states may add their own tax.

There is one Canadian-specific relief. The IRS notes that "nonresident aliens of the United States who aren't residents of Canada can't deduct gambling losses." Canadian residents can, on Form 1040-NR, against US gambling winnings, which can recover some withholding if you also had US gambling losses in the same year. Our guide to sports betting taxes in Canada works through that refund process.

On the Canadian side, a US lottery prize is still a windfall, so Canada does not tax it again. That also means there is usually no Canadian tax to claim a foreign tax credit against, so US tax withheld is a final cost unless you recover it from the IRS.

Claiming a prize in Ontario

A Canadian prize is not taxed, but claiming it still has rules. OLG's claim pages say:

• Under $1,000: take the ticket to an OLG lottery retailer; stores must pay up to $50.
• $1,000 or more: submit an online claim; OLG may mail a cheque or schedule an interview.
• Prizes won on OLG.ca: most are paid directly into the OLG.ca account.
• Deadline: one year from the draw date for terminal-printed tickets.
• Publicity: "OLG publishes all wins of $1,000 or more on our website for a period of 30 days."

Sign your ticket, with one signature per ticket, before you claim. Other provinces have their own claim rules, so check your lottery corporation's winners page. If you are deciding which game to play in the first place, our guide to which lottery has the best odds compares the official odds. Not sure whether a ticket won? Our guide to checking lottery tickets online covers the official scanning apps and how long each province gives you to claim.

Common questions people get wrong

• "I need to report my prize so the CRA knows where the money came from." You do not report the prize itself. Keep the cheque stub and claim paperwork as proof of where the money came from.
• "A big win will reduce my benefits." The prize is not income on your return. The interest it earns later is, and that is what can affect income-tested amounts.
• "Splitting a prize with my spouse saves tax." The gift is tax-free, but income from money given to a spouse is attributed back to you.

Play within a budget

A tax-free prize is a pleasant thought, but the odds of a large win are long, as our odds guide shows. Set a lottery budget you can afford to lose, and if buying tickets stops feeling like entertainment, the responsible gambling page lists free support in every province.

Sources

• CRA: Amounts that are not reported or taxed (modified September 17, 2026)
• CRA: Income Tax Folio S3-F9 (miscellaneous payments and receipts, including lottery winnings)
• Income Tax Act, section 40 (paragraph 40(2)(f)), current to October 19, 2026
• Income Tax Act, section 74.1
• OLG: Winners FAQ
• OLG: How to claim a prize
• OLG: Prizes of $1,000 or more
• OLG: DAILY GRAND odds and payouts
• 26 U.S. Code section 871 (via Cornell LII)
• IRS: Topic no. 419, Gambling income and losses