North Carolina is one of the only sports betting states in which gambling losses are not allowed as deductions on state income tax. However, a recent legislative measure would remediate that provision and allow gamblers to deduct their losses up to the amount of their winnings.
Changing the Code
It is tough enough for gamblers to beat the house, but taxing them strictly on their winnings without allowing deductions for their losses makes it virtually impossible. However, when North Carolina launched sports betting in March 2024, there was no provision for deducting losses, and as gambling expanded across the Tar Heel State, more people began to take notice.
Thus, it is no surprise that legislative attempts have been made to close this loophole, and the most recent comes in the form of House Bill 14, sponsored by Representative Erin Pare.
“Unlike federal law and unlike the majority of other states that have legal sports betting, North Carolina does not allow gambling losses to be deducted, capped at winnings on the state tax return,” explained Pare.
“This is not a gambling bill. This is a fair tax bill,” she continued. “This bill does not take a position on whether gambling is right or wrong. In fact, the supporters of this bill that you’ll see as our primary sponsors, some of them are not big fans of gambling or sports betting.”
Under the current tax structure, should a bettor win $10,000 and lose $10,000 in the same year, which would mean a net gain of zero, they would be taxed at 4.5% on the wins without any allowances for the losses. This would mean this person would be forced to pay an additional $450 on their state income taxes even though they did not profit from gambling.
Good for Business
The new law would allow deductions for gambling losses to be capped at the amount of the winnings and no more than that. As in most jurisdictions, net gambling losses will not be allowed. However, the revised tax code would encourage North Carolinians to continue to wager in the state and not take their gambling dollars elsewhere.
Representative Keith Kidwell, an opponent of sports betting, is also a sponsor of the bill and believes it is not about promoting gambling but maintaining fair taxation practices under the law.
“Our Constitution—North Carolina’s Constitution—says all deductions shall be allowed, so only net income is taxed,” Kidwell said.
North Carolina resident James Joyce spoke during the public comment period in front of the House Commerce Committee, stating, “The moment we realized the implications of this, we stopped gambling because it’s tough enough to beat the house, much less also pay additional taxes when you win.
“We are proud North Carolinians who want to pay our fair share of taxes. Taxing winnings without allowing for the loss of deductions is just completely unjust. The federal government allows deductions for gambling losses. Why is North Carolina ignoring this fair and reasonable precedent?”
HB 14 has advanced through the House Commerce and Economic Development Committee and is currently under scrutiny by the House Finance Committee. Should it be approved there, the bill will appear for a House vote before being heard in the State Senate.
