TLDR
- North Carolina’s budget plan would let bettors deduct gambling losses on state taxes for the first time.
- The deduction would apply retroactively to Jan. 1, 2025.
- The sportsbook tax rate would rise from 18% to 23% under the plan.
- Sportsbooks would need to issue a W-2G form when a customer’s annual winnings reach $2,000 with one operator.
- UNC Chapel Hill and NC State could each become eligible for up to $5.8 million a year in betting tax funds.
North Carolina lawmakers are considering a change to how the state taxes sports betting. The plan could give bettors a tax break while raising costs for sportsbook operators.
The proposal is part of ongoing budget negotiations. It has not yet passed both chambers of the legislature.
Under the plan, bettors would be allowed to deduct their gambling losses on state taxes. North Carolina has never offered this deduction before.
If passed, the change would apply retroactively. Bettors could claim losses going back to Jan. 1, 2025.
The state is also introducing new reporting rules. Sportsbooks would need to send a W-2G tax form to any customer who wins $2,000 or more with one operator in a year.
Earlier drafts of the budget raised concerns among bettors. Without a loss deduction, gamblers could have owed state taxes on their full winnings, even if they lost money overall.
The new deduction is meant to address that problem. It gives bettors a way to lower their taxable income based on real losses.
Federal Rules Still Apply
Even with the state-level change, federal tax rules will still affect bettors. The IRS caps gambling loss deductions at 90% of total losses.
That means a bettor who wins $2,000 and loses $2,000 with the same sportsbook could still owe federal tax on $200. This happens even if the bettor broke even for the year.
Federal reporting rules are separate from the new state threshold. A W-2G is required nationally when a bet pays out $600 or more at odds of 300-to-1 or higher.
The IRS also requires gamblers to report every win and loss. This applies whether or not a tax form is ever issued.
Sportsbooks and Universities See Changes
Sportsbook operators would face a higher tax rate under the new budget. The rate would rise from 18% to 23% on sportsbook revenue.
The betting industry has opposed similar tax increases in the past. Operators say higher taxes lead to worse odds and fewer promotions for customers.
The budget also adds a 6% tax on prediction market companies. Kalshi and Polymarket have said their platforms fall under federal oversight, not state law.
Similar disputes over prediction market taxes are playing out in Kentucky, Illinois, Iowa, and New Jersey.
The budget would also change how betting tax revenue is shared with public universities. UNC Chapel Hill and NC State University would become eligible for funding for the first time.
Appalachian State, Charlotte, and East Carolina already receive a share of the funds. Each of the five schools could receive up to $5.8 million a year under the new plan.
The budget still needs approval from both chambers of the legislature. It would then go to Governor Josh Stein for a final decision.
