2026 Gambling Tax Deduction Limit Leaves Bettors At A Loss
The 2026 Gambling Tax Deduction Limit leaves gamblers, sports bettors and poker players with all the clarity of a smog alert.
Starting Jan. 1, gambling deductions are limited to 90% of losses. That shortfall means that gamblers could well carry a tax liability on no income, or even end up paying income taxes on money they lost.
The good news: those filing tax returns for 2025 (or any previous year) are still able to fully deduct their loses up to winnings. As always, consult your tax advisor.
A provision in the “One Big Beautiful Bill Act” signed into law by President Trump on July 4, 2025 changes all that. Written into the bill by Senate Finance Committee Chairman Mike Crapo (R-Idaho), the law now limits filers to deducting losses up to no more than 90% of their winnings.
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What Changes Under the “One Big Beautiful Bill Act”
That framework changes dramatically beginning with 2026 Gambling Tax Deduction Limit.
Buried inside the 900-plus-page legislation is a rewrite of Section 165(d) that caps deductible wagering losses at 90% of actual losses.
That means even if your losses are lower than your winnings, you may no longer be able to deduct them in full.
The 90% Cap Goes Further Than Losses
The new language doesn’t just hit straight wagering losses. It applies to “any deduction otherwise allowable… incurred in carrying on any wagering transaction.”
Translation: For professional gamblers, this appears to sweep in business expenses — travel, subscriptions, entry fees, and other costs — effectively folding them into the same 90% limitation. It extends the expanded TCJA definition of gambling losses and then caps it. This provision has left numerous professional gamblers and poker players reevaluating their career choices. This also affects gambling establishments like the top sports betting sites.
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Why This Matters: Real-World Examples
Here’s where the math turns ugly under the 2026 Gambling Tax Deduction Limit , according to KPMG.
Example 1: Modest Net Win, Bigger Tax Bill
- $10,000 in winnings
- $8,000 in losses
- Only $7,200 deductible under the 90% cap
- Taxable gambling income: $2,800
- Actual net winnings: $2,000
At a 25% tax rate, the bettor owes $700 — an effective tax rate of 35% on actual winnings. Under the old rules, the tax would have been $500.
Example 2: Near Break-Even, Crushed by Taxes
- $101,000 in winnings
- $100,000 in losses
- Only $90,000 deductible
- Taxable gambling income: $11,000
- Actual net winnings: $1,000
At the same 25% rate, the tax bill jumps to $2,750 — an effective tax rate of 275% on real profits. Under prior law, the tax would have been $250.
Example 3: Phantom Income
- $100,000 in winnings
- $110,000 in losses
- Only $99,000 deductible
- Taxable gambling income: $1,000
Despite losing $10,000 overall, the bettor still owes tax — classic phantom income.
Slim Hopes For A Reversal In 2026?
Rep. Dina Titus (D-Nevada) immediately began pushing her fellow lawmakers to reverse course last summer. But her attempts have proven fruitless. She's currently lobbying her Republican colleagues to include a reversal of the tax deduction provision in the GOP's next attempt at reconciliation.
The House Rules Committee declined to advance the FAIR BET Act, leaving a scheduled gambling tax change set to take effect in 2026.
Titus failed in her effort to get the Fair Accounting for Income Realized From Betting Earnings Taxation Act (FAIR BET Act) included in the National Defense Authorization Act (NDAA) for 2026. That leaves its hope for stand-alone passage all but gone.
The first breakdown of the House GOP's so-called "minibus" did not include any reference to reversing the 2026 Gambling Tax Deduction Limit.
“Lawmaker advocates on Capitol Hill are actively exploring every viable legislative vehicle to restore full deductibility, and we appreciate those efforts. This is about correcting an obvious policy mistake, and it does not create a new tax carve-out," John Pappas of Corridor Consulting told Bookies.com. "Taxing phantom income violates basic principles of fair taxation and shouldn’t be controversial in either party. The longer this policy remains in place, the more it risks distorting consumer behavior by pushing players toward illegal gambling options or alternative activities that do not have the same taxpayer consequences. I suspect this is exactly the opposite of what lawmakers intended.”
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The Bottom Line: Plan Ahead To Pay More In Taxes
Starting in 2026, the new loss limitation means bettors could:
- Pay higher effective tax rates on winnings
- Owe more in federal tax than they actually won
- Be taxed even when losses equal or slightly exceed winnings
- Lose the ability to carry excess losses forward
How bad could it get for some with the new 2026 Gambling Tax Deduction Limit?
The "gambling loss limitation potentially gives rise to a significant personal tax leakage issue for players who may wind up paying a higher federal effective tax rate on their overall net gambling winnings; owe taxes even when they otherwise just break even or in some scenarios where they have realized modest net gambling losses or, in more extreme examples, owe more in taxes than their entire net winnings," KPMG Tax Partner Robert Stoddard wrote.
For high-volume bettors — especially those hovering near break-even — this isn’t a tweak. It’s a fundamental shift that makes gambling riskier on paper than it already is in practice.
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