New Tax Bill Allows WV Gambling Loss Deductions Before Reporting Winnings To IRS

A bill awaiting West Virginia Gov. Jim Justice’s signature to become law changes the way casino and lottery winnings and losses are taxed.

House Bill 2821 allows West Virginians to deduct gambling losses from winnings before filing state taxes. It allows taxpayers who file easy tax forms to deduct gambling losses just like taxpayers who itemize deductions.

Unfortunately, losses cannot exceed winnings, and detailed records of losses must be kept throughout the year.

House Bill 2821 could lower tax burden for hundreds of thousands

West Virginia online gambling is thriving: Online casinos handled $367.6 million in bets in February, the best four-week period in the history of online gambling in the state.

Sponsors of House Bill 2821 include Delegates Jarred Cannon, Brandon Steele, Shawn Fluharty, Clay Riley, William Nestor, Erikka Storch, and Paul Espinosa. The wording of the bill is clear-cut:

“Gains arising from gambling and lotteries are taxable as personal income. For the tax years beginning on or after Jan. 1, 2023, when calculating gains, the taxpayer may deduct gambling and lottery losses up to the amount won for that year, but may not deduct the costs and expenses incurred in connection with the gambling and lottery activity. The taxpayer shall maintain detailed records substantiating losses if the taxpayer intends to deduct those losses. The taxpayer shall have the burden of proving any losses.”

So, gamblers can now deduct their losses from their winnings before they file their taxes. That could lower the tax liability for hundreds of thousands of West Virginia taxpayers.

The amount of losses can’t exceed the amount of winnings. And players must take on the burden of maintaining detailed records to substantiate their losses.

HB 2821 levels the playing field

In reality, HB 2821 should be a no-brainer. All gamblers should be able to deduct losses from winnings before reporting winnings as additional income on tax forms. It will be interesting to see how many states follow West Virginia’s lead on this.

When you take a step back and consider that the state benefits greatly from gamblers playing the games they enjoy at regulated and licensed gambling facilities, it makes sense for states to create some tax relief for players.

As outlined extensively at Play WV, tax money generated from state lotteries and regulated retail and online casinos directly generates money to fund programs that improve quality of life in the state. So, if gamblers are contributing money to fix infrastructure and help schools in the state just by playing, they should not be penalized by Uncle Sam.

It’s a win-win-win. Players get tax relief on gambling losses, the state gets tax money from casinos, and the casinos profit from more patrons playing their games.

Now, it’s up to the governor to sign the bill, which has been sitting on his desk since March 22.