West Virginia just got a whole lot more friendly to online bettors. The state adopted a new law that alters how West Virginians incorporate gambling costs into their taxes.
The law allows West Virginia bettors to deduct gambling losses from their winnings before they file state taxes.
In theory, it sounds great for West Virginia gamblers, and it is. However, there are a few details you should keep in mind if you intend to take advantage of the new rule. Let’s dive in.
WV’s new gambling tax rule: what to know
Previously, West Virginia taxed gamblers on their gross winnings, which was a less favorable structure than the new rule puts forth. Now, gamblers in WV can deduct losses from their winnings as long as they meet a few criteria.
First, losses can only be deducted if they happen in West Virginia. In other words, you can’t deduct losses incurred in any other legal sports betting state if you’ve gambled there while traveling.
Second, the losses you report can’t exceed your winnings. If you break even over the course of a year, you won’t have to pay taxes on winnings because your losses offset taxable winnings.
Third, there’s no need to itemize your deductions. You can still deduct gambling losses while claiming the standard tax deduction.
Finally, you can only deduct losses from legal and regulated gambling platforms. WV Lottery, sports betting sites, racetracks, and casinos all qualify.
How to get the WV gambling loss deduction
To appease the IRS when you file your West Virginia state taxes, you need to keep detailed records of your gambling winnings and losses. This lets you substantiate the losses and winnings you claim. Keep track of your wins and losses so you can easily include them when you file your tax returns.
Most online tax tools (such as TurboTax) will include questions about gambling winnings and losses. If you use a tax resource, it should help walk you through the process. If you have an accountant or hire someone to do your taxes, be sure to give them your records so they can properly deduct the losses.
Note that the deduction is available only for state tax returns. It will not change your federal tax filing.
You can amend older returns
The new law allows gamblers to amend tax returns from 2020, 2021, and 2022, according to Lexology.com:
“[HB 2821] allows taxpayers to amend returns filed for 2020, 2021, and 2022 to account for the decreasing modification.”
Amending your returns to account for the new rule may save you some money. Of course, this is dependent on having records to substantiate your deductions. If you don’t have proof, you won’t be able to amend your previous returns but can claim the deduction going forward.
What does this mean for gamblers?
Generally speaking, this new rule is good for gamblers. It makes West Virginia more friendly to its residents who partake in any form of regulated gambling.
Whether the new law has a major impact on you depends on what type of gambler you are. Seasoned bettors who bet a lot will benefit the most. Casual gamblers who only sprinkle a few bets on major events like the Super Bowl or March Madness probably won’t feel the law’s effect.
In West Virginia, gambling operators are taxed, and the money generated is funneled to various state- and community-wide improvement initiatives. The state stands to gain a lot simply by allowing legal gambling channels. Players who use those channels generate tax revenue by playing. Cutting them a break on their personal taxes is a no-brainer. Players will be more likely to play at WV online gambling sites and locations, generating more revenue (and tax contributions) from operators, the lottery, casinos, and racetracks.
