Sunday, May 19, 2024

Quirk in NC tax law could have you paying more on sports gambling wins

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RALEIGH, N.C. (WTVD) — The Carolina Hurricanes begin their second-round NHL playoff series against the New York Rangers on Sunday, and many fans may be looking to back the team — with a bet or two.

But a new report from NC State highlights why you may have to pay a bit more if you win.

The sports betting bonanza in North Carolina is off and running and people have been taking advantage of those promotions and bonus offers to place their wagers.

The launch coincided with the ACC Tournament and now the focus is the Stanley Cup playoffs.

In March alone, North Carolinians wagered $659 million and $590 million was paid out in winnings.

For those who itemize deductions, at the federal level, they can deduct losses against gains. That is not the case however, in North Carolina – where you would owe state taxes on all winnings regardless of how much you lose.

That discovery was made by two NC State accounting professors who issued a report looking into the state’s tax code.

“If you gamble $50 a day and you alternate winners and losers, meaning that you essentially win about $9,000 and lose about $9,000, you will have broken even,” said Nathan Goldman, NC State Associate Professor of Accounting. “But you will have to pay taxes on the $9,000 that you won. That’s another $405 in taxes that you’re going to have to pay. Now in a more extreme example, if you won $9,000 and lost $18,000, you have lost $9,000 throughout the year and you’re still going to have to pay that $405 in taxes to the state of North Carolina.”

Nathan Goldman said three other states have had similar cases where the gambling deduction did not exist, forcing lawmakers to take action and address it.

“If you invest in two companies, one stock that makes $100 and one stock that loses $100, you’re able to just net those two out together. But that doesn’t exist in sports gambling,” Goldman said. “They say you made $100 in this bet, you lost $100 in this other bet, you’re going to pay taxes that you made, but you don’t get to deduct the $100 loss.”

Goldman also explained a key difference between wagering in casinos and online sports betting.

“The casinos get a little different in that they have what’s called a session,” he said. “If you go in and you buy in for $100 and you play blackjack and you walk out with $200, walking out of there is a single session. They don’t track that you won 5 bets, and you lost two bets and that’s how you got to your $100. They just say that’s all part of one session.

“Now the tough thing with sports gambling is there’s no clear thing of what’s a session for sports gambling,” he added. ” What the companies have interpreted it as and what the other states that have come before us as is that each individual bet is its own session. This is something that even beyond the state of North Carolina that the US Treasury can actually issue more guidance on that can provide slightly more favorable treatment for sports gamblers, especially given that they can be engaging in a very similar activity like playing blackjack, craps, or roulette and have a much more beneficial treatment on the tax(es).”

Gov. Roy Cooper responded to the report on X, writing: “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. Legislators should fix this.”

As for the Hurricanes, they take the ice Sunday at 4 p.m. at Madison Square Garden. The game will be televised by ESPN.

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