Some North Carolina sports bettors could be in for a rude awakening come tax season.
Current law requires that North Carolinians pay taxes on their returns from gambling at a rate of 4.5% — regardless of how much they win or lose. However, unique to the Tar Heel State, gambling losses cannot be claimed as an itemized deduction.
As the industry continues to evolve and becomes more mainstream, a group of state lawmakers have set out to amend those rules. State Rep. Erin Pare recently introduced House Bill 14, which would allow residents to deduct gambling losses on their state tax return.
“It just feels a little backwards,” Nathan Goldman, an associate professor of accounting at the Poole College of Management at NC State University, told RG of the current set-up. “If you ever went to the casino and you bet $100 and lose, you don’t feel like you owe any taxes on it. … The average taxpayer just assumes it’s the same laws as when you go to a casino.”
As Goldman explains, this could potentially create confusion for bettors as they prepare to file their 2024 tax returns.
“The problem that arises is that after $1,000 of activity, you now owe $42,” Goldman said. “You didn’t win any money, you don’t have the wherewithal to pay any money … but you still owe money on the tax you incurred.
“That,” he added, “is the symptom of a bad tax law.”
North Carolina is still a relative newcomer to the industry, having launched sports betting in 2024 in time for March Madness. Gross revenue hit $74.5 million last month, a whopping 108.7% increase from December and the second-highest total on record ($78.1 million in November). Additionally, total wagers hit $646.9 million, up from $629.5 million the previous month.
Pare, a Republican representing Wake County, said via WRAL News that her proposal is aimed at accomplishing multiple goals, including bringing North Carolina’s laws in line with most other states.
“I do see it as a fairness thing, and I also see it as a clarity issue,” she said. “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.”
Goldman, who has conducted extensive research on the subject, said Massachusetts, Michigan and West Virginia each had similar legislation as North Carolina before revamping its laws. Thirty-eight states, plus Washington, D.C., now allow some form of sports betting, with Missouri expected to join the fray this summer.
Pare’s bill — if and when it passes — would be effective for the 2024 tax year. In the meantime, all winnings from gambling must be reported, which differs from federal returns.
That, Goldman surmised, could create more problems than it is worth for the state.
From July through January, North Carolina generated $3.6 billion in wagers, with operators collecting $383 million in revenue. When asked if the current legislation could deter some residents from betting, Goldman certainly was not dismissive.
“I do think, in the current state of things, it’s kind of silly to be betting on sports in North Carolina,” he said. “The odds are already stacked against you. Adding this additional layer, it almost makes it impossible to break even.”
Doug is a seasoned sports writer/editor with bylines for the New York Times, Associated Press and CBS Sports. He also has extensive experience in the betting industry, including work for Point Spreads. Prior to that, he covered UConn women's basketball and football for Hearst Connecticut Media.
