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Taxes on sports-betting winnings may be more than bargained for.
The first official tax season after the legalization of sports betting is here. After NCers spent the first year placing bets and raking it in, now, it’s the government’s turn to get their due. Betters wagered over $5 billion in just 10 months—and thanks to a rule NC and only six other states uphold, some gamblers may be paying a lot more taxes than they bargained for.
To start, NC does not allow gambling losses as an itemized deduction. Read: In some cases, when you are both earning and losing money on a business endeavor, you are able to deduct the amount lost and only fork over taxes on the profit—the losses and successes wash each other out.
Gamblers don’t have that same luxury. Taxes must be paid on your total winnings, regardless of the amount lost. So, if you won $10K but lost $9K, you’ll be paying taxes on $10K, not $1K. Whether you’re up or down doesn’t matter. Revenue is taxed, not your profit.
So, what will the gov do with this huge sum of tax dollars? According to the NC Department of Revenue, the purpose of the 4.5% tax is to establish a fund to promote travel and tourism, grants for youth sports, gambling addiction education and treatment programs, and collegiate athletic departments and other public projects.
Even though sports betting is still relatively new for NCers, this part of tax season isn’t. Ben Micham, president of local accounting firm Micham & McSwain, has clients who have gambled in years past (scratch-off games and the like) and says most lose more than they win. “If you are just a gambler for fun and you made $5 and you lost $10, you’d like to think you can deduct it, but you can’t,” explains Micham. “That’s just the way the rules are.”
But, if you’re currently in the red, there is hope. The newly introduced NC House Bill 14 would amend this rule and allow a state income tax deduction for gambling losses against winnings. As of press time, the bill is lingering in committee, but it will apply to the 2024 tax year if passed in time. So, all bets are not off.
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