North Carolina budget would allow bettors to deduct losses

A proposed North Carolina state budget would let individual sports bettors claim gambling losses on state tax returns retroactive to Jan. 1, 2025, and require sportsbooks operating in the state to report customers whose total annual winnings at a single operator reach $2,000 or more.

Currently North Carolina does not allow gamblers to deduct losses on state returns; the proposal would reverse that policy for the 2025 tax year. The budget measure would also change how sports-betting revenue is taxed and distributed within the state.

Under federal rules, operators issue Form W-2G when a player wins $2,000 or more at a single sportsbook. When a W-2G is issued, a federal limit reduces allowable gambling-loss deductions to 90% of winnings. For example, a bettor with $2,000 in winnings and $2,000 in losses at one operator would remain taxable on $200 because deductions would be limited to $1,800. Federal reporting also applies when a bettor wins $600 on a wager at 300-to-1 odds or longer.

Taxpayers must report all gambling wins and losses on federal returns, though small amounts are often not claimed in practice. Under the state plan, sportsbooks would be required to report customers who meet the $2,000 annual threshold to state authorities.

The proposal would raise the tax on sportsbook revenue from 18% to 23%. It would also impose a 6% tax on prediction market operators. The budget text specifies how additional revenue would be allocated to state programs.

Up to $5.8 million annually in sports-betting tax collections would be allocated to the University of North Carolina at Chapel Hill, North Carolina State University and the Football Bowl Subdivision programs Appalachian State, Charlotte and East Carolina. Under the current allocation system, UNC-Chapel Hill and NC State do not receive a share of the betting revenue distributed to the other public campuses.

The budget must pass both chambers of the state legislature and be signed by Gov. Josh Stein to take effect. If enacted, the state deduction change would apply retroactively to Jan. 1, 2025; reporting and tax-rate provisions would take effect as specified in the final budget language.