If an American citizen living in Canada wins a lottery, do the winnings have to be declared to the IRS?

Question

My husband is American, I am Canadian, and we live in Canada. If he buys a lottery ticket in Canada and wins a large sum of money, does he have to submit a form to the IRS declaring this?

I know a little about US tax laws but have not been able to find the answer to this specific question. I know that lottery winnings are considered "unearned income" and that if he were in the US, he would have to declare his winnings and be taxed on it. I also know that he has to declare his regular earnings while in Canada however, I could not find any information on whether or not foreign lottery winnings have to be declared.

Answer 1

The US is a bit of an exception on this issue but YES it must be reported to the IRS. The US taxes US citizens on world-wide income regardless of where the citizen resides. There are numerous deductions and credits available that will impact the final outcome and so exact numbers can not be provided but you must at least file the return and determine the outcome. In addition to the standard deductions, credits, and exemptions (including credit for tax paid to a foreign government) you may also need to examine the US-Canada Tax Treaty. The Treaty often provides additional benefits. Get yourself a competent tax attorney for this matter and make sure the US and Canada attorneys coordinate their efforts.

Answer 2

Ok, here's how it works.

If you are Canadian and win the Canadian lottery, you get to keep it all, with no taxes.

If you are American and win the Canadian lottery, you have to pay taxes to the US government if you are a legal resident of the US.

If you are American and win the Canadian lottery, but are a legal resident of Canada and do not file taxes with the US at all, you do not have to pay taxes.

I'm guessing that your husband is on some type of international service personnel job in Canada and that he files dual income tax - if that is so, yes he would pay the tax. US and Canada share tax information with each other, so the IRS would know that he won.

Answer 3

American Citizenship Lottery

Answer 4

Lottery winnings are "ordinary income." So you're taxed at the rate as if you had earned that money in that fiscal year. This may include state or local income taxes (note the state in which you win the lottery may want those income taxes). For big payouts, I think about 40% for all taxes would be about right. If you win the lottery of another country, the country of your citizenship will want their cut. There may be deductions for out-of-us income, but I believe it will still be taxed. (P.S. if you got an e-mail saying you've won a European lottery, throw it away, it's a scam!) (Others talk about "top tax brackets." at 35%. That's federal. Don't forget state and local taxes, too. )

Answer 5

Yes he'd have to declare it. An American citizen must declare all his income no matter where he lives.

Answer 6

He cannot receive the winnings for a Canadian lottery if he is not a citizen of Canada.

Answer 7

I am just visiting canada as a visitor if I when a lotto can I get a canaidian citizenship ?

Answer 8

Your husband has to report all of his worldwide income on a US tax return. He would be entitled to credits and exclusions that would probably wipe out any US tax liability originating in income from Canada.

Answer 9

You have to report everything and anything if it has to due with our government and their "fair " share. If he's working and paying taxes in the US it's best not to chance it. In fact I'm declaring this on my taxes just in case.

Answer 10

No-but Canadian taxes will need to be paid. The fact he's American is irrelevant-he lives in Canada.