By most metrics, the launch of sports betting in North Carolina has been a success. Lawmakers should be applauded for creating a market that generated more than $650 million in the first three weeks of existence.
Unfortunately, they overlooked one aspect that Gov. Roy Cooper is calling on them to change in the next session of the General Assembly.
Sports bettors in North Carolina can’t deduct their gambling losses from their tax bill. They are responsible for paying taxes on the entire amount they win from gambling, even if their losses equal their winnings.
Losses from stocks can be deducted from gains on taxes in North Carolina
North Carolina sports betting launched on March 11. Players have eight online sportsbooks to choose from in the Tar Heel State.
Under current law, NC sports bettors are taxed on gambling wins, just as they would be on any taxable income. However, unlike other assets – such as stocks, where an individual can counter their earnings with any losses incurred – sports bettors must pay taxes on the full amount from wins, no matter how much they lose.
According to an analysis by Poole College of Management at North Carolina State, an individual who takes the standard deduction of $14,600 if filing as a single taxpayer, or $29,200 if married, would not be permitted to subtract gambling losses. For example, an individual who won $5,000 sports betting in North Carolina but lost $3,500 would still be taxed on the $5,000 instead of $1,500 (which is the actual net income from sports betting activity).
Lawmakers need to change that, Cooper wrote on X April 29.
“When it comes to sports wagering, it’s not fair to have to pay taxes on your winnings without being able to deduct your losses. Legislators should fix this.”
Feds allow gamblers to deduct losses from winnings on tax bill
Nathan Goldman, an accounting professor at NC State, said any resident of North Carolina who wins a minimum of $600 from a sportsbook will receive a W-2G tax form. That income will be reported to the state. However, if that person loses $600, and breaks even on their betting for the year, they would still be taxed on the $600 winnings.
Interestingly, the federal government does allow gamblers to deduct their losses from their winnings on their taxes.
Most states with legal sports betting markets allow consumers to deduct some or all of their gambling losses from their tax bill. Other activities, such as real estate and cryptocurrency investment, are handled similarly, including in North Carolina, Goldman wrote in a story posted on the Poole College website.
“It’s really important that taxpayers understand what they’re getting into when they gamble, that this is going to be income.”
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