Sports aficionados in North Carolina who enjoy making a wager now and then could finally receive the green light to deduct their gambling losses according to a series of revised rules that are currently under negotiation as per a proposed state budget that still requires votes in both chambers prior to being sent to the desk of Governor Josh Stein.
Retroactive Deductions
According to WRAL in Raleigh, the deduction rule would apply retroactively beginning January 1, 2025, finally removing the Tar Heel state from the list of 10 US states that do not currently enable deducted losses.
With it, the new allowance would bring about another particularly important change: sportsbooks would be asked to report customers’ winnings going over the $2,000 threshold in a given year.
Bettors winning a minimum of $2,000 at a single state sportsbook would, however, still be handed the standard W-2G form and be subject to the new federal rule that caps gambling tax deductions at 90%.
At a national level, W-2G is also officially triggered once a bettor wins at least $600 on a wager at 300-to-1 odds or higher.
As a general rule of thumb, bettors in all US states who are issued W-2G are required to report all of their gambling wins and losses to the IRS, regardless of the amount.
The hard reality, however, tells a different tale, with not a large number of recreational bettors sticking to the rules. Provided a North Carolina bettor hits the new $2,000 mark on either one of their sportsbook apps, the W-2G will ask them to include the respective winnings on their 1040 form.
5% Tax Rise for Sports Operators, 6% Tax on Prediction Market Platforms
The budget proposal would carry the tax that sportsbook operators pay on their revenue from 18% to 23%. The increase, as expected, would ultimately affect bettors, translating to worse odds and the risk of switching to unregulated operators instead.
The budget proposal also features a 6% tax on prediction market platforms. Currently, Kentucky, which is looking to apply a 14.25% tax on prediction markets, is going through a lawsuit initiated by the Coalition of Prediction Markets and the CFTC.
Other states, including Illinois, Iowa, and New Jersey, have made similar proposals regarding the taxation of prediction markets.
Universities Could Finally Get a Cut
Under the new proposed sports betting rules, the University of North Carolina-Chapel Hill and NC State could also get a share of the revenue generated by sports gambling taxes. The amount could reach up to $5.8 million on a yearly basis, as reported by WRAL.
The two universities have so far been left out of these important tax distributions, but this could all soon change as the distribution model would be revamped, also positively influencing Football Bowl Subdivision Appalachian State, as well as Charlotte and East Carolina.
The first $4.5 million would be used for reach-offset costs, gambling addiction treatment and education programs, and youth sports programs.
Legislative leaders continue to work on a plan to support a $1.7-billion baseball stadium, close tax loopholes and exemptions for data centers, and some hospitals and affordable housing developers.