Net vs gross income
In the stock market, winners are taxed according to their profits. If you lose more than you win, you face a net negative. And with the federal government, gambling is taxed the same way—but not in North Carolina, where gamblers face big tax hits according only to their gross gambling income. If a gambler loses as much as they win, they’re still taxed as though their winnings are all profit.
The state’s current income tax rate is 4.5%
For example, a gambler who wins $20k but loses $30k would owe the federal government nothing—they are a net loser of $10k—but they would still owe North Carolina a state income tax for their $20k winnings. The state’s current income tax rate is 4.5%.
Kidwell, a Beaufort County Republican with experience as a local tax and accounting specialist for more than 40 years, spoke about an unnamed client who faces this exact dilemma due to gambling large sums of money at casinos.
Kidwell said: “He wins about $300,000 every year. He also loses about $300,000 every year. … He made a series of bets time and time and time again. Won some, lost some. But at the end of the day, he paid over $20,000 in taxes to the state of North Carolina for money he literally did not have.”
State bill aimed at defusing problem
To defuse this state tax disadvantage, Kidwell has partnered with state Rep. Erin Pare, R-Wake, to pass a bill that will lead to people being taxed on their net gambling income rather than their gross gambling income. If approved, the bill will affect not just sports betting losses, but casino losses and expenditures on lottery tickets.
the state draws huge sums of money from the tax on gross gambling income
Despite gaining bipartisan support for the bill, Pare has failed to pass the bill in the legislature, in part because the state draws huge sums of money from the tax on gross gambling income. In 2024 alone, North Carolina collected $50m off sports betting. In further opposition, some social conservatives see the proposal as not much more than a method to subsidize people’s gambling problems.
Creech speaks out
Rev. Mark Creech, a longtime opponent of bills at the legislature focused on gambling, said: “By allowing taxpayers to deduct their gambling losses, the bill reduces the immediate financial impact of losing money.”
Creech added: “Gambling is not a victimless activity. It often leads to financial hardship, addiction and a host of social problems that extend beyond the individual. By subsidizing gambling losses through tax deductions, the state is indirectly supporting an industry known for its negative social consequences.”
In support of the bill, James Joyce, an avid sports gambler from Holly Springs, told lawmakers on Tuesday: “It’s tough enough to beat the house, much less also pay additional taxes when we win.”
