Under North Carolina's current tax code, all gambling winnings must be declared on an individual's taxes. So winning $1,000 on your last bet would increase your tax bill by $45, but as any gambler will tell you, how much you won isn't the full picture. How much you spent, in losses, to make that $1,000 matters.
Think about it for a second, is it fair for North Carolinians to pay $45 on $1,000 of gambling winnings despite having $1,000 in gambling losses? Of course not. That would result in a net loss of $45!
A recently introduced bill in North Carolina's state legislature (HB14) hopes to change that by allowing North Carolinians to deduct their gambling losses on their taxes. Something that's already in place at the federal level.
Fairness Between Tax Codes
Per the Internal Revenue Service, all gambling winnings are taxable, even for casual gamblers. To deduct your losses, you must provide a record of your wins and losses (always a recommended strategy), and your declared losses cannot exceed your winnings. So even if you lost $1,500 but only won $1,000, you can't deduct more than $1,000 in losses.
Unlike the federal tax code, North Carolina's tax code only cares about your winnings, which could result in even more losses, as I demonstrated in my opening example. HB14 would close that disparity between the state and federal levels, a disparity that has already been closed across multiple states.
In its current form, North Carolinians must pay taxes on their gross winnings rather than their net winnings. This deviates from the Federal government and nearly every other U.S. state. Doing so creates a tax system where taxpayers are subject to taxation, even if they dont win.
— Tax Prof. Nathan Goldman (@Nathan_Goldman) February 19, 2025
Growing Pains
Identifying this gap in North Carolina's tax code is all part of the process of an immature gambling market. North Carolina only legalized online gambling in March 2024.
Passing HB14, which has only been tabled in North Carolina's state legislature, would be effective for the 2024 tax year, so keep all of those gambling receipts handy.
