Tax Bill Provision Limits Gamblers' Deductions for Wagering Losses to 90% of Amount

A tax provision in the comprehensive bill signed by President Trump limits deductions for wagering losses to 90% of the amount, capped at the total winnings. According to H&R Block, this adjustment means gamblers can no longer fully offset losses against gains. The change takes effect for the 2026 tax year, coinciding with major betting periods such as March Madness and the NBA Playoffs.

Under the prior tax code, professional gamblers and other taxpayers could deduct wagering losses fully against winnings, taxing only net income. Adam N. Michel, director of tax policy studies at the Cato Institute, explained that the new rule alters this by allowing only 90% deduction.

For instance, a gambler winning $10,000 on the Super Bowl and losing $10,000 later in the year could deduct only $9,000, leaving $1,000 of unreoffset winnings subject to tax.

Michel noted that capping loss deductions results in taxation on gross receipts rather than net income. He stated, “When loss deductions are delayed, capped, or denied, the government systematically overstates taxable income.” This provision appears in the extensive tax bill, which spans hundreds of pages and includes various reforms.

The change affects individual gamblers, including recreational sports bettors and frequent casino visitors, by increasing their potential tax liability even on break-even years. Tax preparation firms like TurboTax advise keeping detailed logs of all winnings and losses throughout the year.

Losses must be reported separately from winnings on tax returns and cannot exceed the reported winnings amount.

RJS Law, a tax firm, pointed out that frequent casino visits complicate tax planning under the new rules. Gamblers who realize no net gain could still face taxes on the undeductible portion of losses. The IRS requires reporting of gambling income on Form W-2G for certain winnings and Schedule A for itemized deductions of losses.

Looking ahead, affected taxpayers should consult tax professionals for 2026 filings to ensure compliance. The provision aims to adjust revenue collection but has drawn attention from policy experts on its impact on risk-based activities. Broader tax code implications may influence future legislative discussions on income taxation principles.