Even if you’re simply a casual bettor at the casino or track, the amount you pocket from gambling activities during the year is treated as taxable income. Some consolation: At least you can offset some of the tax owed on your winnings during the year. But the massive new law signed in July—the One Big Beautiful Bill Act (OBBBA)—imposes a new limit on deductible gambling losses.
For starters, you can deduct documented losses from your gambling activities during the year, but only up to the amount of your winnings. For example, if you win $10,000 in 2025 and lose $9,000 in other wagers, you can deduct the entire $9,000 loss. However, if you only win $5,000 instead, your gambling loss deduction is limited to $5,000.
[This is part of a Special Series on the tax implications of the broad One Big Beautiful Bill Act, which was enacted in July 2025. It includes a wide range of changes to individual and corporate taxes, deductions, credits, forms and other topics, that affect tax filing starting this year into the future.]
The IRS requires you to keep adequate records to substantiate losses. Note that the IRS may become suspicious if claims for losses exceed the norms. In any event, it’s advisable to keep a log of your activities, indicating the date of the activity, the location, the names of any people who were there with you, the amounts wagered, the type of gambling activity and your winnings and losses. Supplement this log with receipts, tickets, statements, and forms, etc. to serve as proof in case of an audit.
Recommended Articles
The gambling loss deduction can be claimed on your personal return only if you itemize deductions. This deduction is separate and apart from the deduction for “miscellaneous expenses” that has been available in the past. Prior to the Tax Cuts and Jobs Act (TCJA) miscellaneous expenses above 2% of adjusted gross income (AGI) were deductible. The TCJA suspended the miscellaneous expense deduction for 2018 through 2025 and the OBBBA makes the ban permanent.
New law change: Now bettors face another obstacle. Under the OBBBA, only 90% of gambling losses will be deductible, beginning in 2026. The other 10% is gone forever. What’s more, the overall limit on gambling losses up to the amount of gambling winnings remains in place.
Say that you have $10,000 in gambling losses and pull down $12,000 in winnings in the same year. Under the rules in effect for 2025, you can deduct $10,000 in gambling losses if you itemize. However, under the new OBBBA provision, your deduction would be reduced to $9,000 in 2026. There’s no way to circumvent this rule.
Here’s another example. A bettor has $12,000 in gambling losses and $9,000 in winnings in the same year. Under the rules in effect for 2025, he can deduct $9,000 in gambling losses if he itemizes. In 2026, he reduces his losses by 10%, bringing the maximum amount he can deduct to $10,800. The bettor can still completely offset his winnings with a $9,000 itemized deduction.
The tax law change is expected to have a significant impact on taxpayers who gamble extensively. In fact, high rollers face the prospect of having to pay tax on “phantom income” they never receive. Take the example of a taxpayer who regularly plays in poker tournaments. If the poker player wins $200,000 in 2026 but also loses $200,000, the player’s deduction is limited to $180,000. Yet tax is still owed on $20,000 in income despite breaking even.
The gambling community is up in arms about this new law provision. Legislation has already been introduced in Congress to roll back the 90% limit. We will keep you posted on any significant developments. In the meantime, provide guidance to clients who will need your assistance and ensure they have the documentation to support any losses they plan to deduct.
Thanks for reading CPA Practice Advisor!
Subscribe Already registered? Log In
Need more information? Read the FAQs
