If you’ve been placing online sports bets since FanDuel, DraftKings and the like went live in North Carolina last month, you might want to prepare for a bigger tax bill next year — even if you lose.
That’s because of a quirk in the federal tax law, which Tony Mecia wrote about for the Charlotte Ledger Business Newsletter.
He joins me now for our segment BizWorthy.
Marshall Terry: OK, so it makes sense if you win that that’s going to count as income. But how does it work if you lose?
Tony Mecia: Even if you wound up having net losses, you could be paying taxes because you're taxed basically on your winnings. And then you can't really deduct your losses in many cases. Typically, if you have a side business, you're allowed to subtract your expenses off of your revenue. You can't do that with gambling. So, you're taxed on the upside and then you can't deduct the losses, sort of, on the downside. And most people, of course, do lose.
Terry: Now what about state taxes?
Mecia: Yeah, it's interesting. State taxes, there is no ability to deduct gambling losses at all. In your federal taxes, you can deduct gambling losses if you itemize, and only about 10% of taxpayers itemize. But in North Carolina, there is no provision for deducting any gambling losses. So you will pay taxes on the upside and not be able to deduct any of the losses on the downside.
Terry: So what can bettors do? Anything besides itemizing, which as you said not many people do?
Mecia: The other thing that tax experts told me you can do [is] just keep really good records. Might also be worth noting that in most cases, these sports betting platforms do not tell the IRS about how much you are taking in and losing. They only do that in very specific circumstances. So there’ll probably be a lot of people making mistakes, maybe unintentional mistakes, on their taxes. So it's a little bit of a bind.
Terry: All right. Well, switching gears now. We’ve been tracking the office market’s struggles for a while and whether those empty towers uptown should be turned into apartments. You report that a developer has another idea, right?
Mecia: Yes, speaking to the Charlotte Rotary last week, Gary Chesson of real estate firm Trinity Partners, he was asked about what should we do with all these empty old office buildings uptown. And usually what you hear developers say, well, we should look at turning them into affordable housing or maybe we can spruce them up. He said, “a stick of dynamite might be the highest and best use” and suggested that maybe they should just be demolished and replaced with new residential towers, that that might be the best solution. But certainly haven't seen that yet.
Terry: Charlotte does have a long history of tearing things down. Moving on now to social districts. A few weeks ago we talked about the social district that opened in Plaza Midwood. But now another one has opened. Where?
Mecia: Pineville launched its social district this week, Marshall, in downtown. We went out and talked to the owner of a taproom down there, who said that hopefully it will draw people from around the region. [He] said that he considers Pineville to be in competition with Fort Mill, Matthews, South End for getting people to come out. Pineville joins a long list of cities in the region that are adding social districts, including Gastonia, Monroe, Statesville, Kannapolis, Davidson and, of course, Charlotte launched its first social district in Plaza Midwood earlier this year.
Terry: Finally, it’s prom season and you checked in to see what’s fashionable this year. What did you find, and do trends say anything about the economy?
Mecia: We went out and talked to some businesses that work with promgoers, found that some of the things that are in this year, Marshall, include reflective dresses. These are dresses that change color when they're hit with light from different angles, as well as small bouquets of flowers replacing the traditional corsages. Those are becoming a lot more popular. Apparently, teenagers believe they work better and look better in photos.
What does it say about the economy? I mean, I think certainly you see people willing to spend money, you know, on proms. I saw a big stretch limousine Saturday night. Certainly, it seems like there's a lot of spending going on for proms, which a lot of people see as a very memorable experience.
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