North Carolina Gov. Roy Cooper Supports Tax Deductions for Gambling Losses

Posted on: April 30, 2024, 10:19h. 

Last updated on: April 30, 2024, 10:27h.

North Carolina Gov. Roy Cooper (D) supports amending the state’s tax code to permit itemized filers to deduct certain losses from gambling.

North Carolina sports betting Roy Cooper
North Carolina Gov. Roy Cooper thinks sports bettors should be allowed to deduct their wagering losses against their wins to lessen their state tax liability. Online sports betting began in North Carolina in March 2024. (Image: AP)

Cooper on Friday shared a report from North Carolina State University that detailed how the Tar Heel State’s recent launch of online commercial sportsbooks could come with unintended tax consequences. NC State Poole College of Management professors Nathan Goldman and Christina Lewellen explained that sports betting losses aren’t deductible under the state’s current tax policy.

North Carolina considers sports gambling earnings as income that’s subject to a 4.5% tax, the state’s flat income tax rate applied to all individual filers. While sports betting and other gambling winnings are also taxed at the federal level at an effective rate ranging from 10% to 37%, the IRS allows gambling losses to be deducted up to the amount of the filer’s gambling winnings. That isn’t the case in North Carolina, something Cooper thinks needs amending.

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,” Cooper tweeted on X.

Online sports betting in North Carolina began in March. There are currently eight online sportsbooks licensed and operating — FanDuel, DraftKings, BetMGM, Caesars Sportsbook, ESPN Bet, Fanatics, bet365, and Underdog Sports.

Sports Betting Losses

Cooper believes North Carolina sports bettors should be able to deduct some of their losses against their winnings. Under the state’s current tax environment, if a bettor wins $1,000 and decides to roll the payout into a new bet, and that $1,000 bet loses, the individual must still pay tax on the $1,000 original win — or $45 to the state.

Under the IRS tax scheme, the person could deduct the $1,000 loss against the $1,000 win and pay no federal tax on the betting activity. Goldman and Lewellen summarize that many bettors will have sports betting tax liabilities next year when completing their 2024 state tax filing without having net winnings.

The professors say the detailed tracking of an online sports betting account makes it clear to both state tax officials and the filers of their gambling tax obligation. That differs greatly from a person playing a slot machine at one of the state’s three tribal casinos. Unless a gambler uses a rewards card, the cash gambling trail isn’t nearly as documented.

“The level of sophistication of sports betting tracking differs substantially from taxpayers gambling in casinos in that every single wager, whether big or small, is carefully tracked and organized. This increase in innovation has dramatic tax implications in that it is significantly easier to report both gambling winnings and losses,” Goldman and Lewellen wrote.

Betting Catalogue Could Also Change 

North Carolina’s sports betting market could change slightly with the exclusion of individual player prop bets involving college athletes. The NCAA stresses that bets involving a student-athlete’s performance have led to player harassment on college campuses and threaten the integrity of college sports.

North Carolina Rep. Marcia Morey (D-Durham) plans to soon introduce legislation to prohibit such bets. One of the main sponsors of North Carolina’s sports betting law, Rep. Jason Saine (R-Lincoln), doesn’t think banning regulated sportsbooks from college player props would much help the NCAA’s claimed problem.

“This kind of behavior would still continue with fanatic people. Follow the rules of society. You don’t threaten anybody, or shouldn’t be,” Saine said. “I don’t think we need a whole new set of rules.”