North Carolina Governor Roy Cooper is asking the General Assembly to deal with a tax problem that might make sports bettors pay taxes, even if they lose money. Let’s take a closer look at the Governor’s proposal and its potential impact on top-rated sportsbooks in the region.
Taxing Times
Under current law, sports bettors in North Carolina must pay state income taxes on their winnings but cannot deduct their losses to lessen the tax bill. Governor Cooper urged state lawmakers to address this issue, which could become problematic now that mobile sports betting is legal across the state.
“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,” Cooper said on social media. Cooper was a supporter of legalization. “Legislators should fix this.”
Attempt To Prevent Unexpected Tax Burdens
According to the current law, if a bettor won $1,000 but lost $5,000, they would still owe taxes on the $1,000 winnings. Any potential changes wouldn’t allow you to subtract losses from your overall income, but rather use them to cancel out taxes owed on winnings.
Nathan Goldman, a CPA and accounting professor at North Carolina State University, pointed out that the state can address this issue immediately. He emphasized that doing so would prevent unexpected tax burdens and align the North Carolina tax system with what many consider fair.
“It’s really important that taxpayers understand what they’re getting into when they gamble, that this is going to be income,” Goldman said. “These apps track every single bet that you make. They track every single winner, every single loser. They know exactly where you made that bet too, whether you’re in North Carolina or Virginia or New York. And, they’re keeping very careful track of your gambling activity.”
“Sessions” Also Need To Be Addressed
Goldman says another thing that should be addressed is what constitutes a betting “session.” In casinos, there’s a concept called a “session,” where if you start with $100 and leave with $200, that’s considered one session, regardless of how many individual bets you won or lost.
However, with sports gambling, defining a session is unclear. Companies and other states treat each individual bet as its own session. This lack of clarity means sports gamblers could face less favorable tax treatment compared to other types of gambling. The US Treasury could provide clearer guidance to ensure fair treatment for sports bettors that engage in similar activities to casino gamblers like blackjack or roulette.
What Happens Next?
North Carolina hopes to follow the lead of other states like Michigan, Massachusetts and West Virginia that have laws that let taxpayers deduct gambling losses on their state tax returns. North Carolina’s law, which stops people from deducting net gambling losses, has been around since 2015. Back then, sports gambling wasn’t as common because of Supreme Court restrictions.
Now that things have changed, and the Governor is on board, it appears that the time is right for the North Carolina General Assembly to reconsider this law. Allowing taxpayers to deduct sports gambling losses could prevent them from facing unexpected and hefty tax bills next tax season.
Calculators
