New Gambling Tax Rule: Loss Deductions Capped at 90%

If you gamble—whether it's slots, cards, or sports betting—there’s a new tax rule you need to know about. Starting January 1, 2026, you can’t deduct all your gambling losses anymore.

Under the new law in the One Big Beautiful Bill (also known as OBBB), the IRS will limit gambling loss deductions to just 90% of your winnings. This means some people may owe taxes on money they didn’t really keep.

Let’s break this down so it’s simple to understand.

How the Tax Law Works Right Now

Let’s say you win $10,000 at the casino this year. You also lose $10,000 during the year.

Right now, the IRS lets you deduct your losses equal to your winnings. So if you win and lose the same amount, you don’t pay tax on it.

It’s like you broke even.

You still have to report the income, but the losses cancel it out. No extra taxes.

What’s Changing in 2026

Starting in 2026, you won’t be able to deduct 100% of your losses anymore.

You’ll only be able to deduct up to 90% of your total winnings.

So if you win $10,000, the most you can deduct is $9,000, even if you lost $10,000.

That leaves $1,000 as taxable income, even though you really didn’t make any money.

Here’s a Simple Example

Let’s look at two gamblers:

Sarah:

Wins: $20,000
Loses: $20,000
Before 2026: No tax—$20K won, $20K lost
After 2026: Can only deduct $18,000 → Pays tax on $2,000

Mike:

Wins: $100,000
Loses: $95,000
Before 2026: Pays tax on $5,000 profit
After 2026: Can only deduct $90,000 → Pays tax on $10,000 “profit”

Even though neither gambler really came out ahead, they’ll now owe taxes on part of their winnings. This is sometimes called “phantom income”—because it’s money you didn’t actually keep.

Why This Matters to You

This change could hurt people who:

Gamble often or with high stakes
Play professionally or semi-professionally
Track winnings and losses carefully for tax time

If you’re a casual gambler who wins once or twice a year, it might not affect you much. But if you gamble often—at casinos, online, or on sports—it could mean bigger tax bills.

What Lawmakers Are Saying

Supporters of the new rule say it will:

Make the tax code simpler
Prevent people from using fake or inflated gambling losses
Bring in more tax revenue to fund other parts of the law

Critics say:

It unfairly taxes people on income they never actually took home
It hits frequent gamblers hardest, even when they don’t profit
It could hurt people who treat gambling like a side business

What Counts as Gambling Income?

According to the IRS, gambling income includes:

Casino winnings
Lottery payouts
Sports betting wins
Raffle prizes
Poker tournaments
Online betting platforms

If you win anything, you’re supposed to report it. This is true even if the casino or sportsbook doesn’t send you a tax form.

Can I Still Deduct Gambling Losses at All?

Yes—but with limits.

Starting in 2026, you can only deduct up to 90% of your winnings. So you can still offset part of your gambling income, just not all of it.

To do this, you’ll need to itemize your deductions—meaning you skip the standard deduction and list all your write-offs, including:

Gambling losses
Mortgage interest
Medical expenses
Charitable donations

If you don’t itemize, you can’t deduct gambling losses at all.

Keep These If You Gamble

To protect yourself and get every legal deduction, keep records like:

Casino win/loss statements
Receipts and betting slips
Bank statements
Online gambling history
W-2G forms from casinos or sportsbooks

The IRS may ask for proof if you’re audited.

Should You Change Your Strategy?

This rule might change how some people approach gambling—and taxes.

If you gamble often, you may want to:

Limit how much you wager
Spread your gambling income across tax years
Talk to a CPA about tax-smart strategies
Set aside money for taxes now

When Does This Start?

The new 90% deduction rule starts on January 1, 2026. That means your 2025 tax return (filed in 2026) will be the last one under the current system.

So if you're planning any big gambling activity or trips, it's smart to understand the timing.

Gambling can be fun—but it can also be expensive, especially when taxes come into play.

With the new 90% cap on loss deductions starting in 2026, gamblers may end up owing taxes on money they didn’t actually earn. That’s why it’s more important than ever to track your wins and losses, understand your tax situation, and plan ahead.

If you have questions about how this could affect your tax return, now’s the time to ask.