North Carolina Lawmakers Seek to Make Gambling Losses Tax Deductible

A group of 12 Republican state representatives are sponsoring a bill that would make losses from gambling tax deductible in North Carolina. If passed, the legislation would fix what some see as an oversight in the state’s gambling laws, which has become a lot more relevant since last year’s launch of sports betting.

Gambling winnings are taxed as income by the federal government and by some states. When filing federal taxes, gamblers are allowed to offset any losses against their winnings. However, that’s not always true at the state level.

Currently, North Carolinians are taxed on winnings from gambling in the state, including casino and sports betting. But, those consumers are not permitted to deduct any losses.

For example, imagine that a North Carolina online sportsbook user withdraws $3,000 in winnings, then redeposits and loses $2,500 in the same year. That player will owe state tax on $3,000 in winnings. The IRS would allow them to deduct the $2,500 loss and pay tax on net winnings of $500, but North Carolina doesn’t currently see things that way.

North Carolina sports betting launched in March 2024. The state also has a lottery and retail casinos.

Bill 14 would bring NC gambling tax in line with federal policy

North Carolina House Bill 14 was introduced on January 29, sponsored by several members of the Republican party. Those names are: Rep. Erin Pare, Rep. Steve Tyson, Rep. Keith Kidwell, Rep. Matthew Winslow, Rep. Celeste Cairns, Rep. Richard Carver, Rep. Wyatt Gable, Rep. Edward Goodwin, Rep. Chris Humphrey, Rep. Jake Johnson, Rep. Jarrod Lowery, and Rep. Jeffrey McNeely.

Rep. Pare told WRAL News in Raleigh recently:

There’s a lot of confusion right now since sports gambling is a new thing in North Carolina, that most people who have been engaging in that over the last year made the assumption that the state laws around this were the same as federal. This is just the right thing to do for the people.

The bill passed its first reading in the state house and has been referred to the Committee On Rules, Calendar, and Operations of the House. That means the legislation is waiting to be scheduled for debate and a possible vote on the floor.

The current version of HB 14 reads “a taxpayer may 6 deduct from adjusted gross income either the standard deduction amount provided in subdivision 7 (1) of this subsection or the itemized deduction amount provided in subdivision (2) of this provision…” This means tax payers who itemize their income and losses would be able to deduct money lost from legal wagering in North Carolina.

HB 14 might face opposition from Senate leadership

Although the legislation has support from House Republicans, it could face opposition from their peers in the State Senate. Most importantly, North Carolina State Senate leader Phil Berger is against the bill.

He told WRAL News:

[It has] never been the policy in North Carolina to allow, at the state level, deduction of or the balancing of losses versus gains.

North Carolinians have embraced legal sports betting

Since it launched online sports betting last March, North Carolina has seen more than $5 billion wagered in the state.

According to the North Carolina State Lottery Commission, which regulates all gaming in the Tar Heel State, consumers won in excess of $4.7 billion in the first 10 months of legal online sports betting. That figure also includes winnings at retail casinos.

 

Image Credit: sweet_tomato/Shutterstock

About the Author

Dan Holmes

Dan Holmes writes about sports betting, sports media, and sports betting legislative matters. He's the author of three books, and previously reported for Major League Baseball, as well as the National Baseball Hall of Fame and Museum.