RALEIGH, N.C. — Online sports gambling began in early March in North Carolina.

What You Need To Know

  • Sports betting became legal in North Carolina in early March

  • Fans around the state have tried it out

  • Current tax code in the state doesn't allow residents to deduct losses from online sports gambling

  • The IRS does allow for itemized winnings and losses

As diehard faithful wait to see if the Carolina Hurricanes can extend their second-round series against the New York Rangers for Game 5 on the road, there’s something to be aware of about online sports betting relative to taxes.

The advent of real-time sports betting has opened a portal for avid fans pursuing gambling in its newest form. Harry McLeod is one of those people.

“It’s been an interesting thing because I want the Canes to win every single time, but if you make a bet on them and they don’t win, it can be a little bit ahhhh,” McLeod said.

So many fans are betting day in and day out on their favorite teams, and they are doing it in North Carolina using nothing more than their phones. There’s a catch, though.

The state government does not currently have laws allowing sports bets placed online to be itemized for gambling losses for the next tax season. That’s why N.C. State Accounting Professor Nathan Goldman spoke up when he learned what was at stake.

He said taxpayers should know. 

“They get a surprise bill all the way down the road when it may not have been as clear that they were going to owe that money,” Goldman said.

McLeod said he’s been a fan of the Hurricanes since attending his first game.

There aren't enough words in the English dictionary to describe his love for the Canes and the feeling of watching them winning on home ice.

“One of my friend’s dads took me to a Canes game when I was pretty young. Probably about 10 years old, and I really enjoyed it,” McLeod said.

McLeod chased that childhood feeling right into adulthood.

“The atmosphere is ridiculous,” McLeod said.

The atmosphere inside PNC Arena for Game 2 of the first-round series was also electric. The Hurricanes blew past the New York Islanders to snatch a 5-3 victory from the jaws of defeat. 

“It was so loud in there. It was probably one of the loudest (environments) I’ve ever actually heard in there,” McLeod said.

The home team erased a 3-0 deficit with a late-game storm surge, as Jordan Martinook scored the second of two goals, nine seconds apart, to put the Canes ahead for good in the final period.

“When Martinook scored again, you couldn’t barely hear the goal horn go off because it was so loud,” McLeod said.

Not even 30 minutes before the puck drop of Game 5 in the first-round home game for the Hurricanes, McLeod placed a bet on the Canes to win.

“I will use Fanatics since they partner with the Canes,” McLeod said.

The digital sports betting platform announced the partnership earlier this year.

The Canes season-ticket holder said he had 34 bets simultaneously in play on the day of the game.

“I’ll do a $20 bet,” McLeod said.

At the time of the bet, McLeod had no clue how those bets would affect him come the next tax season. When he found out, the hockey fanatic said he felt blindsided. 

“If I say won $20,000, but I lost $30,000, I’m still getting taxed on $20,000. It’s a huge thing I didn’t realize,” McLeod said.

Goldman said McLeod isn’t alone.

“What a lot of people didn’t quite realize is that taxes were immediately going to come into play,” Goldman said.

The certified public accountant said when he discovered how new online sports gambling platforms would affect North Carolina taxpayers, he double-checked with the N.C. Department of Revenue to see if he was missing anything. He wasn’t.

“Taking it a step further for the North Carolina level, they do not have an itemized deduction for gambling losses. That means you are going to pay taxes on what you made, but you are not going to deduct the losses that you had,” Goldman said.

Goldman said the IRS lets you itemize gains and losses like the stock market. A bettor is taxed on their wins and allowed to deduct their losses up to the amount they won.

But Goldman said the state plays a whole different ballgame until N.C.’s tax code is updated.

“In North Carolina, they don't even care how much you lost if you won money. So, even if you won $100,000, but you lost $100,000, you're going to pay for an 4.5% tax on that $100,000 that you won. The losses just don't even come into play,” Goldman said.

Licensed big-name sportsbooks like DraftKings, FanDuel and BetMGM differ from traditional in-person gambling at casinos.

“Because every single bet that you place, every single time you win money or lose money, that is being tracked carefully by the providers,” Goldman said.

Gov. Roy Cooper weighed in on X. He said, “Legislators should fix this.”

Goldman warned of who will be hit hardest by this.

“The lower-income taxpayers are going to feel this because that's just digging away at the deductions they otherwise get,” Goldman said.

McLeod also wants it fixed.

"That needs to be adjusted then because they are going to tax me on what I win and not adjust for what I lost.”

Goldman says if you made as much as $600 from sports gambling, you will receive a W-2G form from the provider.

Like a normal W-2 form, he said you will see a line for how much you won, how much money you wagered in total, plus an area for gains and losses.