Esmeralda’s American Holiday: What Happened in Vegas Followed Her Home

Our friend Esmeralda is a Canadian citizen who loves to gamble – she considers it her “retirement planning” and cannot live without it. “I love to play poker, I have some element of control, you know, it’s kind of like investing in mutual funds (MF’s) or real estate. I love the thrill, plus it is 100% tax exempt”. Esmeralda, is correct that her poker gambling is exempt, along with her other gambling such as her purchases of the weekly Lotto 649 or the night at her favorite slot machine – this is true IN CANADA, for Canadians. As you may or may not know, it is different for our American friends living in and gambling in Canada (more in a different post).

I remember talking to Esmeralda about her “strategic tax planning” and how she hasn’t had a trip in over 25 years. She had mentioned going to Vegas to kill two birds with one stone. “I want to travel and build wealth and this can all be accomplished by going to Vegas”.

She had enjoyed her trip except one minor detail – she was taxed on her poker winnings – she had a very good winning streak, the best in her life. Boy, she was mad as could be. “I win $100 000.00 and I only get to come back with $70 000.00, what the heck”, she was screaming at this point. “They take my money, they give me this stupid form (1042-S), and they expect me to be happy! How can I be happy?”

She did not like my explanation in the least – things are different in Vegas or anywhere else in the United States when people like to plan their retirement “Esmeralda style”. It is a fact that US sourced income from gambling and lotteries is fully taxable – with the exception of a few “exempt games”. “What are those games? I lost $30 000.00 and don’t like it”. For information and planning purposes the exempt games are: craps, blackjack, big-6 wheel, roulette, or baccarat. The general rule was a surprise to Esmeralda, as it is to many other gamblers from around the world. Non US persons (nonresident aliens) are generally subjected to a 30% tax with holdings on gross gambling winnings. Canadian citizens and residents are able to get some or all of this money back due to a special provision in the tax treaty – U.S. –Canada Tax Treaty Article XXII (3) – under the condition that they file a US return, the 1040NR. Canada’s relationship with the US is so special that there is a special place on the 1040NR just for us.

In my next post “Esmeralda Want’s Her Money Back”, I will explain to Esmeralda, how to go about recovering some or all of the money and what she should do if she gambles in the future – and knowing her – it is going to be sometime soon.

7 thoughts on “Esmeralda’s American Holiday: What Happened in Vegas Followed Her Home”

    1. Not a scam, please refer to “Esmeralda Wants Her Money Back” posted on the 15th. Let me guess, you got lucky.

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