North Carolina Budget Adds Gambling Loss Tax Deduction

Jonathan Rodriguez

Written by: Jonathan Rodriguez

Published: Wed Jul 01, 2026, 7:00 am ET

Read Time: 5 minutes

North Carolina Budget Adds Gambling Loss Tax Deduction

industry

North Carolina lawmakers have included a significant tax change for gamblers in the state's proposed 2026-27 budget. If approved, the measure would allow eligible residents to deduct documented gambling losses from their state taxable winnings for the first time.

In a recent report, the proposal marks a major shift for North Carolina gambling. Currently, the state taxes gambling winnings without allowing players to offset their losses. 

At the same time, lawmakers want to increase the tax rate paid by US online sportsbooks and revise how those revenues are distributed across the state.

The additional tax revenue would help support the broader state budget. This includes a proposed pay raises for state employees and public school teachers. Meanwhile, the budget also contains new provisions affecting prediction markets. 

This makes it one of the most comprehensive gambling-related proposals since legal online sports betting launched in March 2024.

Proposed North Carolina Budget Would Give Gamblers Long-awaited Tax Relief

The proposed budget lets North Carolina taxpayers deduct documented gambling losses against winnings on state income taxes, replacing the current tax on net losses.

If enacted, bettors could reduce their taxable gambling income by the amount of their documented losses, provided they maintain appropriate records. However, taxpayers generally must itemize their deductions to claim gambling losses. 

Those who continue using the standard deduction would typically remain unable to deduct their losses, meaning many casual bettors could still owe tax on their gross winnings.

The proposal closely mirrors the federal tax treatment of gambling winnings and losses, making North Carolina's rules more consistent with existing federal guidelines.

Lawmakers also included a retroactive provision. The deduction would apply to gambling activity dating back to January 1, 2025, instead of only future wagers.

As a result, eligible taxpayers could amend previously filed state tax returns to claim deductions for qualifying gambling losses. 

That provision could benefit many residents who reported gambling winnings during 2025 without receiving any state tax relief for their losses.

New Reporting Requirement

The proposal also introduces a new reporting requirement aimed at improving tax compliance. Licensed sportsbooks must report data on customers earning over $2,000 from betting activity.

This helps the state improve income reporting and easily catch discrepancies on tax filings.

The proposal affects winnings from legal gambling activities, including sports betting. However, US online casinos remain unavailable in North Carolina, as the state has not legalized internet casino gaming. Residents can legally wager only through licensed retail casinos and regulated online sportsbooks.

NC Budget Also Raises Sportsbook Taxes and Changes Revenue Distribution

While the proposal benefits bettors, it would increase the tax burden on operators.

The budget would raise the tax rate on US online sportsbooks from 18% to 23% of gross wagering revenue. The increase is considerably lower than last year's proposed 36% rate.

Based on current collections, the higher rate would have produced approximately $170 million in annual sportsbook tax revenue instead of roughly $133 million under the existing 18% rate.

Lawmakers intend to use part of that additional revenue to help finance the state's broader spending plan, including proposed salary increases for state employees and public school teachers.

The budget also revises how sportsbook tax revenue would be distributed to public universities.

Under the proposal, the University of North Carolina at Chapel Hill and North Carolina State University would become eligible for dedicated sportsbook tax funding. Each school would initially receive distributions capped at $2.5 million. 

That cap would increase to $5.8 million annually beginning July 1, 2027. This allows funding to scale over time instead of reaching the maximum immediately.

The revised distribution aims to expand educational funding while preserving existing allocations for athletic departments and responsible gambling initiatives.

Prediction Markets Targeted

Beyond sports betting, lawmakers included language addressing prediction market operators.

The proposal would impose a 6% tax on net trading fee revenue generated by sports-related prediction market platforms that offer event contracts resembling traditional sports wagers. The move follows increased scrutiny of federally regulated operators, including those offering sports event contracts that compete with licensed sportsbooks.

North Carolina lawmakers argue these platforms should contribute state tax revenue under a framework similar to other regulated wagering operators.

The proposal does not prohibit prediction markets. Instead, it establishes a dedicated tax structure while preserving the state's existing oversight of licensed sports betting.

What the Proposal Could Mean for North Carolina Gambling

If lawmakers approve the budget, the changes would reshape North Carolina gambling from both a consumer and industry perspective.

For bettors who itemize their deductions, the ability to offset documented losses would eliminate one of the state's most criticized tax policies. However, many casual gamblers who claim the standard deduction would likely see little change to their state tax treatment.

The new $2,000 reporting requirement could also increase tax compliance by giving state officials additional data to verify reported gambling income.

Meanwhile, sportsbook operators would face higher operating costs through the increased tax rate. Although some operators may absorb those costs, others could adjust promotions, bonuses, or marketing spending over time.

The revised revenue distribution would direct additional funding toward higher education. Meanwhile, the new prediction market tax would broaden the state's gambling tax framework beyond traditional sportsbooks.

The proposal still requires final legislative approval before becoming law. If enacted, it would represent one of North Carolina's most significant gambling policy updates since the launch of regulated online sports betting.

Jonathan Rodriguez
Jonathan Rodriguez

Jonathan is an avid basketball fan, and is often looking forward to the next upcoming NBA season when not checking players' stats during games. He also likes to keep his ears on the ground for the latest rumblings in the online casino industry.

This site contains commercial content. We may be compensated for the links provided on this page. The content on this page is for informational purposes only. Betting News makes no representation or warranty as to the accuracy of the information given or the outcome of any game or event.