Starting with the 2026 tax year, a new federal rule caps your gambling loss deduction at 90% of your losses. Win $50,000 and lose $50,000 in the same year — breaking even in real life — and the IRS can still tax you as if you made $5,000. If you don’t itemize your deductions, it’s worse: none of this helps you, and you owe tax on your full winnings with no offset at all.
- The old rule let you deduct gambling losses dollar-for-dollar against your winnings, as long as you itemized. The new rule only lets you deduct 90% of those losses.
- If you take the standard deduction instead of itemizing, none of this changes anything for you — you’re taxed on your full winnings either way, exactly as before.
- “Going pro” and filing on Schedule C does not get you out of the 90% cap. It only helps if the itemizing requirement was your actual problem.
- Congress is actively trying to repeal the 90% cap — a repeal provision cleared a House committee this week — but it is not law yet.
Jump straight to the exposure checker →
And here’s the fix almost everyone gets wrong: becoming a “professional” gambler doesn’t get you out of the 90% cap. It just fixes a different problem — and it might not even be yours.
What’s Your Exposure? (An Illustrative Estimator)
This is a quick, plain-English estimate to show you which situation you’re in — it is not a tax calculation and won’t tell you what you actually owe.
Enter your rough numbers above and select your filing situation to see an illustrative estimate.
This is an illustration only, not a tax calculation, and the 90% rule’s fate in Congress could change before you file.
Old Rule vs. New Rule, at a Glance
| Feature | Before OBBBA | Under OBBBA (2026 and later) |
|---|---|---|
| Deduction rate on losses | 100% of losses, up to your winnings | 90% of losses, up to your winnings |
| Break-even gambler (won $X, lost $X) | $0 taxable gambling income | 10% of winnings becomes taxable “phantom income” |
| Requirement to claim the deduction at all | Must itemize on Schedule A | Still must itemize — unchanged. Standard-deduction filers get nothing either way |
| Professional gambler (Schedule C) | No itemizing required; losses and related expenses fully offset winnings | No itemizing required, but losses and related expenses are now also capped at 90% |
| The disallowed 10% | N/A — losses were allowed in full up to winnings | Permanently lost. It does not carry forward to a future year |
| W-2G reporting threshold (slots, keno, bingo) | $1,200–$1,500, unchanged since 1977 | $2,000, indexed for inflation starting in 2027 |
1. The New Rule: A 90% Cap on Gambling Losses
That’s the plain-English version of what this rule does. It doesn’t matter that you never touched the extra cash — the tax code now treats 10% of your offsetting losses as if they didn’t happen.
90% of your losses offset your winnings. The remaining 10% (the hatched slice) is simply gone — not deductible now, not deductible later.
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, quietly rewrote Section 165(d) of the tax code. For tax years beginning after December 31, 2025 — meaning the 2026 tax year, the return you’ll file in early 2027 — you can no longer deduct 100% of your gambling losses against your winnings. You can only deduct 90%. The older rule that losses can never be deducted beyond your winnings for the year is still in place; OBBBA didn’t touch that part, it just shaved 10 percentage points off the deduction itself.
Illustrative example (not your own numbers): Say a taxpayer wins $100,000 gambling over the course of 2026 and loses $100,000 gambling in that same year — a true break-even year in cash terms. Under the old rule, $100,000 of losses fully offset $100,000 of winnings, and taxable gambling income was zero. Under the new rule, only 90% of $100,000 — $90,000 — is deductible. That leaves $10,000 of taxable “phantom income,” even though this taxpayer didn’t come out ahead by a single dollar.
The disallowed 10% isn’t a timing issue. It doesn’t roll forward to next year, and there’s no mechanism to recover it later. It’s simply gone.
2. The Bigger Trap: If You Don’t Itemize, None of This Helps You
Here’s the part that trips people up worse than the 90% cap itself: this entire discussion only matters if you itemize your deductions. Gambling losses have never been deductible unless you claim them on Schedule A instead of taking the standard deduction — that was true long before OBBBA, and OBBBA did not change it. It only made the itemizer’s math worse.
So the honest breakdown looks like this:
- You itemize: You’re affected by the new 90% cap. Before 2026, you could fully offset your winnings with your losses. Starting in 2026, you can only offset 90% of them.
- You take the standard deduction: The 90% cap is irrelevant to you, because you never got to deduct gambling losses in the first place. You are taxed on 100% of your gross winnings, exactly as you always have been. OBBBA didn’t create this exposure — it was already the harsher outcome, and it remains the harsher outcome.
Most casual bettors take the standard deduction, because for most people it’s larger than what they could itemize. That means most casual bettors were already in “full exposure” territory before this law ever passed — the new 90% rule mainly widens the gap for people who do itemize, while leaving non-itemizers exactly where they’ve always been: taxed on the gross.
For context, the 2026 standard deduction is $16,100 for single filers and married filers filing separately, $32,200 for married couples filing jointly, and $24,150 for heads of household (IRS Rev. Proc. 2025-32). Your gambling losses would need to be part of itemized deductions that, combined with everything else you itemize, exceed that number before claiming them does anything for you at all.
2b. Don’t Forget Your State — It May Not Follow This Rule At All
Everything above is federal. Your state return is a separate question, and it can be worse than the federal rule in ways that have nothing to do with the 90% cap.
- Some states don’t allow a gambling-loss deduction at all, itemized or otherwise. Connecticut, Illinois, Indiana, Massachusetts, Michigan, Ohio, and Wisconsin are commonly cited examples — residents there can owe full state income tax on gross gambling winnings with zero offset, regardless of what they do federally.
- Other states conform to the federal code as of a fixed date, which may or may not automatically pick up the 90% cap (or a future repeal). A state that hasn’t updated its conformity date could still be running on the old 100% federal rule for state purposes even after 2026.
- A handful of states apply their own netting or reporting rules — for example, some categorize wagering income by type of gambling and don’t allow losses in one category to offset winnings in another.
The short version: a federal repeal of the 90% cap, if it happens, won’t automatically fix a state that never allowed the deduction in the first place. Check your state’s specific gambling-tax rules, or ask a tax professional licensed in your state, separately from anything in this article.
3. Sports Betting and the W-2G Paper Trail
If most of your action is on an app like DraftKings or FanDuel, or at a retail sportsbook counter, this section is for you. Sportsbooks and casinos issue Form W-2G for qualifying wins — historically at a $1,200–$1,500 threshold for slots, keno, and bingo, now raised to $2,000 starting with 2026 payments and indexed for inflation after that. That threshold change makes fewer individual jackpots reportable, but it doesn’t change your obligation to report your actual gambling income for the year, and it says nothing about your losses.
This is where digital tracking cuts both ways. Because platforms log every wager, they also make it easier to prove a losing pattern — most major sportsbooks and casinos offer a downloadable win/loss statement for the year. That statement is not the same as a W-2G (which only captures specific large wins) and it is not automatically filed with the IRS on your behalf, but it’s one of the strongest pieces of evidence you can hand a tax preparer when reconstructing your actual results.
The practical takeaway: pull your win/loss statement from every platform you used, for every year you gamble, before you sit down to file. Waiting until deadline week to reconstruct a year’s worth of sessions from memory is exactly how people either overpay or invite an audit.
4. Does “Going Pro” Get You Out of This? (No — Here’s What It Actually Fixes)
You may have seen claims online — including in some tax-firm content — that becoming a “professional gambler” and filing on Schedule C lets you deduct 100% of your losses and sidestep the 90% cap entirely. That’s incorrect. OBBBA’s 90% limitation applies to professional gamblers too, covering both wagering losses and related business expenses. There is no professional-gambler carve-out.
Here’s the distinction that actually matters. Someone who gambles as a genuine trade or business reports on Schedule C rather than Schedule A. That comes from Commissioner v. Groetzinger, the 1987 Supreme Court case that set the “facts and circumstances” test for professional-gambler status: full-time, good-faith effort, engaged in regularly, with earning a livelihood as the primary purpose — not a hobby or occasional side action.
The real benefit of qualifying as a professional isn’t a bigger deduction. It’s that Schedule C filers don’t need to itemize to claim their gambling losses. A professional gambler’s losses and related business expenses come off as ordinary business deductions, regardless of whether they itemize personally. That solves the standard-deduction trap from Section 2 above. It does nothing for the 90% cap from Section 1 — a professional’s combined wagering losses and related expenses are still limited to 90% of the amount, and still capped at total gambling gains for the year, exactly like a casual itemizer.
And professional status comes with real strings attached that a casual bettor doesn’t have to think about:
- Self-employment tax. Net gambling income on Schedule C is subject to the 15.3% self-employment tax, on top of ordinary income tax. Casual gamblers don’t pay this.
- It’s a factual determination, not a choice. You can’t simply elect professional status on a form because it would help your taxes. The IRS and courts look at whether your actual conduct meets the Groetzinger standard, and claiming the status without qualifying facts invites scrutiny.
- Increased audit attention. Professional-gambler claims are a known area of IRS interest precisely because the tax treatment differs from casual play.
Bottom line: if your problem is that you take the standard deduction and get no offset at all, professional status (if you genuinely qualify) can help. If your problem is the 90% cap itself, going pro does not solve it — you’ll trade one limitation for another set of obligations, including self-employment tax, and remain subject to the same 90% ceiling.
5. Your Documentation Defense
Because the 90% cap raises the financial stakes of every gambling-loss calculation, expect more scrutiny on how those numbers were arrived at. The IRS has long expected gamblers to keep contemporaneous records — the date, type of wager, location or platform, and amounts won and lost, corroborated by W-2Gs and platform statements where available. That expectation isn’t new; it just matters more now that a bigger share of your losses is riding on the deduction actually holding up.
Wins and losses are generally measured by session, not by individual bet — so a log that captures each session’s net result, not just a running tally of individual wagers, is what a preparer or an examiner actually wants to see.
Strong Evidence
- A log kept the same day as each session — not reconstructed later
- Date, location/platform, game type, and net result per session
- Downloaded win/loss statements from every platform used, matched against your own log
- W-2Gs kept alongside session records, not treated as a substitute for them
Weak or Insufficient Evidence
- A single reconstructed estimate built the week before filing
- A vague total like “I probably broke even for the year”
- Relying on W-2Gs alone — they only capture certain large wins, not your losses
- No knowledge of, or never requesting, platform win/loss statements
| Category | Strong evidence | Weak / insufficient evidence |
|---|---|---|
| Timing | Contemporaneous, logged the day of the session | Reconstructed from memory at tax time |
| Session detail | Date, location/platform, game type, amounts won and lost per session | A single annual estimate with no breakdown |
| Corroboration | Platform win/loss statements and W-2Gs matched to your own log | W-2Gs treated as the whole picture |
| Format | A running log (spreadsheet, app, or notebook) kept continuously | A spreadsheet built the week before filing |
6. Is Congress Going to Fix This? (As of September 18, 2026)
A repeal provision has cleared one House committee. It has not passed the full House, has not passed the Senate, and has not been signed by the President. Its status could change quickly in either direction — check a live tracking source like Congress.gov’s page for H.R. 10357 before you rely on anything below.
On September 16, 2026, the House Ways and Means Committee voted 38–5 to advance a repeal of the 90% cap — the most significant step yet in a repeal effort that has actually failed several times over the past year. It’s worth walking through the full sequence, because it’s easy to conflate the different bills and attempts involved:
- July 2025 — the FAIR BET Act is introduced. Rep. Dina Titus (D-NV) introduced the Fair Accounting for Income Realized from Betting Earnings Taxation Act, the first bill proposing a full restoration of the 100% deduction.
- July 2025 — a Senate attempt is blocked. Sen. Catherine Cortez Masto (D-NV) sought unanimous consent on the Senate floor to restore the full deduction; Sen. Todd Young (R-IN) objected, and the request failed.
- September 2025 — first House Rules Committee setback. Titus tried to attach the FAIR BET Act as an amendment to the 2026 National Defense Authorization Act. The House Rules Committee declined to advance it, and it never reached a floor vote.
- January 2026 — second House Rules Committee setback. A comparable amendment was proposed for the Consolidated Appropriations Act. The Rules Committee again declined to advance it.
- February 2026 — a discharge petition. With the bill stalled in the Ways and Means Committee for roughly eight months, Titus filed a discharge petition — a procedural move that needs 218 signatures to force a floor vote without committee approval.
- September 16, 2026 — committee passage, via different language. The provision that finally cleared committee wasn’t the FAIR BET Act itself. It was based on the separate, bipartisan FULL HOUSE Act from Rep. Max Miller (R-OH) and Rep. Steven Horsford (D-NV), folded into H.R. 10357, the Digital Asset Tax Certainty Act — a bill that is primarily about digital-asset tax rules and carries the gambling fix as one provision among many. Both Miller and Horsford sit on Ways and Means, which helped the language advance during markup.
The provision approved in committee would eliminate the 90% limitation and restore a full deduction for wagering losses up to the amount of winnings, applied retroactively to tax years beginning after December 31, 2025 — meaning the entire 2026 tax year, if it becomes law. Ways and Means Chairman Jason Smith summarized the intent plainly, saying the fix means Americans “are not taxed on money they didn’t actually keep.” The Joint Committee on Taxation estimates that fully repealing the 90% cap would reduce federal revenue by roughly $2 billion from 2027 through 2036 — the cost side of the argument that opponents of repeal continue to raise.
What’s left before this is law: a vote by the full House (reporting at the time of this committee action suggested that vote may not happen until after the November 2026 midterm elections), passage by the Senate (a companion effort there has support from Senators Cortez Masto, Rosen, and Cruz), and the President’s signature. Any one of those steps could stall, change the bill’s language, or fail outright. As of this week, a prediction market tracking the outcome implied roughly a 48% probability of repeal by April 1, 2027 — cited here as one data point reflecting current market sentiment, not a forecast of what will happen.
What this means for your filing: plan your 2026 taxes around current law — the 90% cap is real and in effect right now. If a repeal passes and is signed before you file, retroactive relief would apply to the full 2026 tax year based on the current committee language, but that outcome is not guaranteed, and this article will not tell you to bet your filing strategy on it happening.
7. What This Isn’t
This article is educational information, not personalized tax advice, and it is not a suggestion to change your professional-gambler status purely to chase a tax angle — professional status is a factual determination the IRS and courts evaluate on your actual conduct, not something you elect for convenience. For anyone with meaningful gambling activity in 2026, talk to a licensed tax professional before you file. For broader context on other changes in the same law, see our guide to OBBBA Tax Changes 2026: Every New Deduction Explained.
8. FAQ
What is the OBBBA gambling loss deduction change?
Starting with the 2026 tax year, the One Big Beautiful Bill Act limits the deduction for gambling losses (and related professional-gambler business expenses) to 90% of the amount, still capped at your total winnings for the year. Previously, the deduction was 100% of losses up to winnings.
Can you really owe taxes if you break even gambling in 2026?
Yes, if you itemize. Because only 90% of offsetting losses are deductible, a taxpayer who wins and loses the exact same amount in a year can still show taxable “phantom income” equal to 10% of that amount.
What is “phantom income” in gambling taxes?
It’s the gap between what you actually kept (potentially nothing, in a break-even year) and what the tax code treats as taxable, because the 90% cap disallows part of your offsetting losses.
Do I need to itemize to deduct gambling losses at all?
Yes — this was true before OBBBA and remains true after it. If you take the standard deduction, you cannot claim gambling losses on Schedule A, and the 90% cap is irrelevant to your situation because you were never getting an offset in the first place.
Does going pro get me out of the 90% cap?
No. Professional gamblers filing on Schedule C are also subject to the 90% limitation on wagering losses and related business expenses. Professional status only removes the itemizing requirement — it does not restore a 100% deduction.
How do you qualify as a professional gambler with the IRS?
There’s no election or form — qualification is a facts-and-circumstances test from Commissioner v. Groetzinger (1987): gambling full-time, in good faith, with regularity, where earning a livelihood is the primary purpose rather than a hobby. The IRS and courts look at your actual pattern of activity, not a label you choose.
What records does the IRS expect in a gambling log for audit purposes?
A contemporaneous record for each session — the date, location or platform, type of wager, and the amount won or lost — corroborated by W-2Gs and platform win/loss statements where available. A log reconstructed after the fact from memory generally carries far less weight than one kept as you go.
Will the 90% gambling tax be repealed?
Unknown as of this writing. A repeal provision cleared the House Ways and Means Committee on September 16, 2026, but it still needs a full House vote, Senate passage, and the President’s signature. A prediction market tracking the outcome implied roughly a 48% probability of repeal by April 1, 2027, as one data point — not a forecast.
Are prediction market (Kalshi, Polymarket) losses subject to the 90% cap?
It depends on how the activity is characterized on your return. If prediction-market results are reported as gambling income, the same gambling-loss rules apply: capped at winnings, deductible only if you itemize, and subject to the 90% limit starting in 2026. If they’re instead reported as ordinary trading or business income, different netting rules can apply. This is an unsettled, fast-moving area — get advice specific to how you’re reporting this activity before assuming either treatment.
Is the 90% rule retroactive if it’s repealed?
Under the language that cleared committee on September 16, 2026, a repeal would apply retroactively to tax years beginning after December 31, 2025 — the entire 2026 tax year. That language has not yet become law, so this remains a proposal, not a settled outcome.
What counts as a “session” for logging purposes?
Generally, a discrete period of continuous play at one game or activity, tracked by its net result (total won or lost during that session) rather than bet-by-bet. Keeping a log organized by session, with the date, location or platform, and net result, tends to hold up better than a single annual estimate.
Do I have to report gambling winnings if I never received a W-2G?
Reporting your gambling income generally isn’t limited to only the amounts that triggered a W-2G — that form only documents specific qualifying wins above a threshold. This is a general information point, not filing guidance for your specific situation; a tax professional can walk through what applies to you.
What documentation do I need to prove gambling losses?
Contemporaneous session records (date, location or platform, game type, amounts), corroborated by W-2Gs and downloadable win/loss statements from the platforms or casinos you used.
Can I carry the disallowed 10% forward to next year?
No. The 10% of losses disallowed by the cap in a given year is simply not deductible — there’s no carryforward or later recovery mechanism under current law.
Does the 90% cap apply differently to online sports betting versus casino play?
The 90% limitation applies to wagering losses generally, without a special carve-out based on whether the activity happened online or in person. Reporting mechanics like W-2G thresholds can differ by game type, which is a separate issue from the deduction cap itself.
What’s the difference between the FAIR BET Act and the language in H.R. 10357?
The FAIR BET Act was Rep. Dina Titus’s original 2025 proposal, which stalled as a defense-bill amendment. The language that actually advanced through committee on September 16, 2026 is based on a separate bill, the bipartisan FULL HOUSE Act from Reps. Max Miller and Steven Horsford, attached to H.R. 10357, the Digital Asset Tax Certainty Act.
When would a repeal actually take effect if H.R. 10357 becomes law?
As currently drafted, the repeal would apply retroactively to tax years beginning after December 31, 2025 — but it still needs a full House vote, Senate passage, and the President’s signature before any of that takes effect.
Should I switch to professional gambler status just to avoid the 90% cap?
No — and not only because it wouldn’t work. Professional status is determined by the facts of your actual gambling activity, not by an election you make for tax purposes, and it brings self-employment tax and added IRS scrutiny. Talk to a tax professional before considering any change to how you report gambling activity.
How are gambling winnings taxed in general?
Gambling winnings are generally includible in gross income. Losses can offset winnings only if you itemize (or, for a genuine professional, on Schedule C), and only up to the amount of winnings — a limit that predates OBBBA and remains unchanged, on top of which the new 90% cap now sits.
Before You File Your 2026 Return
- Keep a contemporaneous log of every session as you go — not a reconstruction built at tax time.
- Download win/loss statements from every platform and casino you used during the year.
- Know whether you itemize before assuming the 90% rule even changes your math — if you take the standard deduction, it doesn’t.
- Don’t switch to “professional” status purely for a tax angle on the 90% cap that doesn’t actually exist.
- Check the current status of the repeal effort before you file — it’s one of the fastest-moving stories in tax policy right now.
- Talk to a tax professional if your gambling activity for the year is significant, win or lose.
This article is for general education only and is not tax advice. The legislative status of the 90% gambling-loss cap described in Section 6 is changing rapidly; this article reflects information verified as of the date below and may not reflect later developments. Consult a licensed tax professional about your specific situation before making any filing decisions.
Last updated: . The legislative section above specifically reflects information verified as of that date — re-check a live source like Congress.gov before relying on it.
Daniel Hayes is the founder and sole researcher at AdvoraHQ. He covers U.S. personal finance, insurance, and consumer law — working directly from IRS publications, federal and state statutes, court opinions, and SEC filings rather than secondary summaries. His focus is the gap between what readers think they know and what the source documents actually say. Daniel is not a licensed attorney, CPA, or financial advisor; his articles are educational and not personalized advice. Reach him at Daniel.Hayes@advorahq.com.
