North Carolina lawmakers are moving closer to approving a state budget that would allow gamblers to deduct their betting losses for state tax purposes, marking a significant change for one of the few US states that currently prohibits the practice. The proposal remains under negotiation and still requires approval from both legislative chambers before reaching Governor Josh Stein’s desk.
If adopted, the measure would apply retroactively to 1 January 2025. North Carolina is currently among just 10 states that do not permit taxpayers to offset gambling winnings with documented losses on their state tax returns.
The revised budget also softens an earlier reporting proposal for sportsbook customers. Under the latest version, operators would only be required to report players who record at least $2,000 in winnings with a single sportsbook during a calendar year. Those bettors would receive a W-2G tax form, triggering additional reporting obligations.
However, the federal tax rules remain unchanged. Under the current federal framework, gambling loss deductions are limited to 90% of winnings, meaning some bettors could still owe federal income tax even if their winnings are fully offset by losses. For example, a player who wins and loses $2,000 with the same sportsbook could still face tax on a portion of those winnings.
The proposal also raises North Carolina’s sportsbook tax rate from 18% to 23%, increasing the financial burden on licensed operators. Industry observers have warned that higher taxes may eventually be reflected in less competitive odds or reduced promotional offers for customers.
In addition, the budget includes a 6% tax on prediction market operators, although companies such as Kalshi and Polymarket are expected to challenge state taxation efforts, arguing that their markets fall under federal oversight. Similar disputes are already unfolding in several other US states.
The revised funding plan would also redirect a larger share of sports betting tax revenue to higher education. Under the proposal, the University of North Carolina at Chapel Hill and NC State University, along with Appalachian State, Charlotte and East Carolina, could each receive up to $5.8 million annually from sports betting proceeds.