North Carolina Gambling Tax: How Your Gambling Winnings Are Taxed
With legal online North Carolina sports betting going live soon, you'll want to know as much as you can about the laws and regulations around legal sports wagering. That includes how gambling winnings will be taxed in North Carolina.
Whether you play big or little, all gambling activity is subject to state income tax as well as federal taxes. It's crucial you report all gambling winnings on your tax returns.
Beyond that, we're going to get into some of the general questions you may have. You may find it wise to consult a tax professional or financial advisor to handle your taxes on gambling in North Carolina, especially if you know your income tax return is already going to be complicated.
Your income is already taxed. You don't have to be.
North Carolina Gambling Tax Calculator
Let's start with your federal income tax.
Your tax rate is determined by your income tax bracket and your annual gross income. While your winnings are subject to both federal and state income tax, they're not payroll, so you won't have to worry about FICA.
Your total taxable income, including winnings, minus either the standard or itemized deductions is what you'll need to work out your tax rate.
Your marginal tax rate refers to which tax bracket your income lands you in. Your effective tax rate is the percentage you actually pay, and varies based on your total taxable income and your filing status (they tend to be better for a married couple.)
The share the IRS gets will vary based on your effective tax rate, and your gambling winnings could bump you up to the next bracket. This is part of why you need to keep close track of your records before the process of your start filing your tax return.
So Uncle Sam got his cut. But Raleigh comes for theirs next.
North Carolina has a flat tax rate of 5.25% on taxable income. Because winnings are considered taxable income, that means that to square it up with the state, your North Carolina gambling winning taxes are that same rate of 5.25%.
Are Gambling Winnings Taxable in North Carolina?
Yes, gambling winnings are absolutely taxable in North Carolina.
Gambling winnings from the tribal casinos, parimutuel wagers on races, or any kind of state lottery are taxed by the state. Any winnings from any newly legalized gambling operations (such as online North Carolina sportsbook apps) will surely take the same flat rate from the state and sliding tax rate from the federal government.
What are the Gambling Tax Rates in North Carolina?
When you've made enough in gambling winnings to get the attention of the IRS, they'll generally withhold 24% of what you've won for your federal income tax. But your total income is going to determine what you'll actually pay when you file.
On top of that, in North Carolina, gambling taxes are at the same 5.25% rate as other earned income. Expect to pay tax on winnings as you would any other money you bring in the old-fashioned way.
How to Claim and Report North Carolina Gambling Winnings for Taxes
If you meet a certain threshold of gambling winnings, you'll receive a W-2G form from the operator. That form details the amount you've won and whether any federal tax was withheld. Here are the thresholds after which you should receive this form.
- đź“ť Slot Machines: $1,200
- đź“ť Bingo or Keno: $1,500
- đź“ť Poker Tournaments: $5,000
- đź“ť Pari-mutuel wagers: $600 (if the payout is at least 300 times your wager)
The operator will send a similar form to the Internal Revenue Service for their records, too. If you win big at a table game such as blackjack in a casino, you should keep track of the your payouts, since the casinos aren't required to issue you a W-2G for table games.
Non-residents are also subject to state income tax on money won in North Carolina casinos or racetracks.
What to Do if You Do Not Receive a W-2G Form in North Carolina?
You may not get a W-2G form from the gambling operator. Therefore, you should be keeping close track of all your gambling wins and losses for your next income tax return. It's a good idea to keep income records for yourself, but the IRS also expects you to keep an accurate record. You may need to prove your wins and losses with receipts or other records.
Can I Deduct Gambling Losses in North Carolina?
It depends. If you have to pay tax on winnings, you should be able to deduct gambling losses, right? Seems fair. Well, who said life was fair?
If you use itemized deductions, your gambling losses qualify as a deduction on your federal tax return. Your losses can't exceed your winnings, though. Meaning if you win $2,000 and lose $5,000, only $2,000 worth of gambling losses will qualify for deduction, and the rest can still be taxed.
You may be asked to back up your claims of gambling losses with records. These may include the following:
- âś… Any W-2G Forms issued by operators
- âś… Form 5754 (related to group gambling winnings)
- âś… Bet slips with dates, locations and amounts won or lost
- âś… Canceled checks
- âś… Credit records
- âś… Bank statements
Again, this is only if you itemize. If you take the standard deduction, this won't apply to you.
Furthermore, the tax laws of North Carolina do not allow you to claim gambling losses as itemized deductions on your state return. Remember that you won't have to deduct gambling losses if they involve North Carolina sportsbook promotions, because most of the time, those are free!
Professional gamblers have a whole different set of challenges best sorted by a tax pro, but the short version is that filing income tax with Schedule C (self-employment) is going to be the go-to here.
North Carolina Lottery Taxes
In January 2018, the Tar Heel State changed its rules around how North Carolina lottery winnings were taxed for winnings over $5,000. Players found their winnings subject to similar taxes as other income, but the state began taking out the minimum tax before issuing the check to the winner.
This currently means that prizes from lotteries are getting withheld the 24% for the feds and 5.25% from the state. We don't have a lottery calculator available but taking those two percentages from your winnings should do the trick.
You'll get a W-2G form for your troubles, and at that point, it's a good idea to check with a professional who understands income tax law to make sure everything lines up correctly.
How Are Group Lottery Wins Taxed in North Carolina
If you and the gang at the office pooled together for a big lotto jackpot and your number hit, first of all, congratulations. Second, you're still going to be subject to income taxes on the federal and state level.
Form 5754 applies to groups of people receiving winnings, so you'll need to submit this form with your next income tax return, alongside the W-2G form. The group wins are taxed at the same rate as individual wins, so you can expect withholdings as described above.
Taxes on Multi-State Lottery Wins
If you win the jackpot in a multi-state game, such as Powerball or Mega Millions, you'll be expected to pay tax on winnings by the same schedule as any other lottery. That means the you'll be taxed at 5.25% by the state and Uncle Sam will withhold 24% until the next time you file an income tax return. This applies whether you wait out the annuity or take the smaller lump sum.
What Happens If I Don’t Report My Gambling Winnings?
Do you really want to know? It's not pleasant.
Reporting your gambling winnings is the law. Not reporting is illegal and could result in late filing penalties and interest if you get caught. That's probably the extent of it, but that's bad enough. I don't recommend taking the chance.
Another thing to keep in mind when reporting your income is that if you got a W-2G form from a gambling operator, the IRS got one, too. So they know what you won and how much of it they want. Cut out the government at your own risk.
North Carolina Gambling Taxes FAQs
Author
Brian Dermody cut his teeth professionally in the world of UFC marketing but has since turned his attention to the booming sports betting industry in the US. He now spends his days relentlessly testing and reviewing the top sports betting apps available to ensure bettors know exactly what they are getting into when they sign up with a bookie.
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