North Carolina Budget Proposal Allows Gambling Loss Deductions in Major Tax Shift

North Carolina lawmakers are moving closer to approving a major change to the state’s gambling tax rules, with a proposed budget now allowing bettors to deduct gambling losses from winnings for state tax purposes.

The change would represent a major change in North Carolina’s tax framework, as the state is currently one of only a handful of jurisdictions that does not allow gamblers to deduct losses on state returns. Under the proposed budget, eligible bettors would be allowed to offset gambling winnings with losses, offering relief to players who previously faced tax obligations based solely on gross winnings rather than net results.

The move comes as North Carolina continues overhauling its sports betting and gambling landscape through ongoing tax and regulatory reforms.

Major Change for North Carolina Bettors

For many bettors, the proposed deduction represents one of the most meaningful changes in the latest budget package. Under current rules, North Carolina bettors must report gambling winnings as taxable income but are largely unable to deduct losses at the state level. This has created criticism from both bettors and industry stakeholders, who argue the existing framework unfairly taxes gross winnings without accounting for overall profitability.

If approved, the new deduction would allow qualifying taxpayers to offset a portion of their gambling losses against winnings, aligning North Carolina more closely with federal tax treatment and policies seen in many other states. Supporters argue the change improves fairness and creates a more balanced system for legal bettors.

Budget Includes Broader Gambling Reforms

The gambling loss deduction is only one part of a bigger budget proposal. North Carolina lawmakers are also moving forward with plans to raise the state’s online sportsbook tax rate from 18% to 23%, increasing the financial pressure on operators as the state looks to generate additional revenue from the fast growing sports betting market.

In addition, the proposal includes a new 6% tax on prediction market operators, further signaling North Carolina’s intention to capture revenue from emerging event based trading platforms such as Kalshi and Polymarket. These changes highlight the state’s increasingly aggressive approach to gambling taxation and oversight.

Industry Reaction Remains Mixed

While the gambling loss deduction has been widely welcomed by bettors, the greater budget package has received mixed reactions from the industry.

Sportsbooks have pushed back against higher tax rates and additional reporting requirements, warning that rising operating costs could reduce promotional spending and make regulated markets less competitive compared to offshore alternatives. Some operators have also raised concerns that increased tax pressure could ultimately impact pricing and customer value.

At the same time, supporters of the new framework argue the updated rules strike a better balance between consumer fairness and state revenue generation. For regulators, the goal appears to be strengthening oversight while ensuring the state benefits more directly from continued market growth.

North Carolina Continues Tightening Gambling Policy

The latest proposal underscores how quickly North Carolina’s gambling market is evolving. Since launching legal online sports betting in 2024, the state has emerged as one of the more active regulated markets in the Southeast. With betting activity continuing to grow, lawmakers are now taking a more active role in shaping how gambling is taxed and regulated moving forward. 

That includes tighter tax structures, expanded reporting rules, and now potential tax relief for bettors. The result is a rapidly changing regulatory environment for both operators and consumers.

A Defining Moment for North Carolina’s Gambling Market

The proposed budget could mark another major turning point for gambling in North Carolina. Allowing bettors to deduct gambling losses would address one of the market’s biggest tax related complaints, while larger reforms signal that lawmakers remain focused on maximizing revenue from the expanding sector.

For bettors, the change could provide meaningful financial relief. For operators, however, rising taxes and tighter oversight suggest the state is taking a stronger position on gambling regulation. As North Carolina continues refining its gambling framework, the latest budget proposal could play an important role in shaping the next phase of market growth.

Stay tuned to UMG Gaming for more updates on sports betting, gambling legislation, and the latest regulatory developments shaping the U.S. gaming industry.