West Virginia Adopts New Tax Law: Good for Gamblers

West Virginia joined the ranks of favorable states for gamblers last week, as it adopted a new law that will allow residents to deduct gambling losses against their gambling winnings. Prior to the law, West Virginia was one of a handful of states that did not allow a deduction for gambling losses, taxing residents on their gross gambling winnings. As the state looks to expand into iGaming, legislators aimed to provide relief to residents who wish to gamble within state lines.

The most notable item to arise from the new law? It is retroactive to 2020 and residents can file amended returns in order to claim losses as a deduction. This will allow anyone who filed gambling winnings on their state return a chance to offset these winnings and potentially recoup some of the tax paid.

The law also outlines the specifics around the deduction:

• Residents can only deduct losses incurred within West Virginia

• Residents do not have to itemize their deductions to deduct gambling losses

• Gambling losses cannot exceed winnings

• Similar to Massachusetts, only gambling losses in regulated gaming establishments can be deducted. This includes sportsbooks, casinos, tracks and the state lottery

It is important to note that the above criteria only apply to West Virginia state income taxes. Federal reporting requirements and guidelines are not affected by the new law.

It will be interesting to see if some of the other unfavorable states for gamblers decide to follow suit, or continue to impose a tax on gross gambling winnings.