Key Highlights
- A proposed North Carolina budget would allow sports bettors to write off gambling losses on their state tax returns for the first time ever.
- Loss deductions would be backdated to January 1, 2025.
- Sportsbook operators would see their tax rate increase from 18% to 23%.
- Operators must provide W-2G forms to customers whose yearly winnings hit $2,000 with a single platform.
- Two major universities—UNC Chapel Hill and NC State—would qualify for as much as $5.8 million annually in gaming tax revenue.
State legislators in North Carolina are weighing significant modifications to the way sports betting is taxed. The proposed changes would provide financial relief to bettors while simultaneously increasing the tax burden on sportsbook companies.
This proposal remains under discussion as part of broader budget deliberations. Both legislative chambers have yet to approve the measure.
The plan would create a pathway for bettors to deduct their gambling losses when filing state taxes—a benefit North Carolina residents have never had access to previously.
Should lawmakers approve the legislation, the deduction would take effect retroactively. This means bettors could claim losses incurred since the beginning of 2025.
Additionally, new documentation requirements would be established. Any customer accumulating $2,000 or more in winnings with a single operator during a calendar year would receive a W-2G tax document.
Previous versions of the budget sparked significant worry among the betting community. Without the ability to offset losses, gamblers faced the prospect of paying state taxes on gross winnings, even when their net results showed a loss.
The newly proposed deduction is designed to remedy this concern. It provides bettors with a mechanism to reduce their taxable income based on documented gambling losses.
IRS Regulations Remain Unchanged
Despite these state-level modifications, federal tax obligations continue to impact bettors. The Internal Revenue Service limits gambling loss deductions to 90% of total losses incurred.
This creates a situation where someone who wins and loses $2,000 with the same operator may still face federal tax liability on $200—even though they finished the year at break-even.
Federal documentation standards operate independently from North Carolina’s proposed $2,000 threshold. Nationally, a W-2G must be issued when any single wager produces winnings of $600 or more at odds exceeding 300-to-1.
The IRS mandates that all gambling activity—every winning and losing wager—be reported by taxpayers, regardless of whether documentation is provided.
Impact on Operators and Higher Education
Sportsbook companies would experience increased taxation under the proposed budget. Their revenue tax rate would climb from the current 18% to 23%.
The gambling industry has historically resisted comparable tax hikes. Companies argue that elevated tax rates force them to offer less favorable odds and reduce promotional offerings for customers.
The budget additionally imposes a 6% levy on prediction market platforms. Companies like Kalshi and Polymarket maintain their operations are governed by federal regulations rather than state jurisdiction.
Comparable disagreements regarding prediction market taxation are currently unfolding across Kentucky, Illinois, Iowa, and New Jersey.
The proposed budget would restructure how gaming tax dollars are distributed to state universities. For the first time, UNC Chapel Hill and NC State University would become recipients of these funds.
Appalachian State, Charlotte, and East Carolina universities currently receive allocations. Under the revised plan, all five institutions could receive up to $5.8 million annually.
The budget requires passage through both legislative chambers before reaching Governor Josh Stein for final approval.
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