Did you fill out a winning bracket with an organization for the NCAA basketball tournament known as March Madness? You may have rewarded for your astute choices with hundreds or even thousands of dollars, but there’s a drawback: Like most other forms of income, the winnings from sports betting and other gambling activities, such playing the lottery or craps in a casino, are fully taxable.
At least you can offset some of the tax liability with your gambling losses. Be aware, however, that the new One Big Beautiful Bill Act (OBBBA) cuts back the tax benefits of loss deductions. This controversial provision could even result in “phantom income” for some gambling enthusiasts.
Details: Typically, if you win a March Madness pool offered by an organization you will receive a Forn W-2G, Certain Gambling Winings, listing the amount of your winnings. Reporting is automatic if the total winnings (reduced by the wager) amount to $600 or more and are at least 300 times the amount of the wager. A copy of the W-2G is also sent to the IRS so its computers may flag your return if you fail to report the winnings on the tax return for the year of the event.
Also, an organization must withhold federal income tax at a 24% rate if the proceeds (reduced by the wager) exceed $5,000.
However, if you itemize deductions on your return you may write off the amount of your gambling losses up to the amount of your losses under long-standing law. This takes into account your income and losses from all your annual gambling activities supported by adequate proof. For example, if you won $5,000 in 2025 and lost $7,500 gambling, your loss deduction was limited to $5,000.
Major change: Beginning in 2026, only 90% of gambling losses is deductible by itemizers on their personal returns. The other 10% is gone forever. To add insult to injury, the overall limit on gambling losses up to the amount of gambling winnings remains in place, for a double tax whammy.
Say that you pocket $12,000 in gambling winnings in 2026 and can prove losses totaling $10,000. Previously, you could deduct $10,000 but now your deduction is limited to $9,000.
Even worse, certain professional gamblers and others who gamble extensively could encounter another problem. Suppose that you travel extensively around the country participating in various poker tournaments. If you win $200,000 and lose $200,000 during the year, you may only deduct $180,000. Therefore, you effectively owe tax on $20,000 of income, even though you are actually breaking even for the year.
Buzzer-beater: Stakeholders in the gambling industry have strenuously objected to the provision in the OBBBA limiting gambling losses. It is continuing lobbying efforts to have this provision repealed. So there still may be some time on the clock regarding the change. We will keep you posted on any important developments.
The introduction of the 90% limit on wagering loss deductions set off a seismic reaction in the gambling community. Legislation has already been introduced in Congress to roll back the 90% limit before it ever takes effect. These measures have some bipartisan support in Congress, although a recent effort to fast-track a repeal was effectively blocked. We will keep an eye of the progress of these bills and report any significant development. In the meantime, continue to toe the line.
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Tags: brackets, gambling, gambling app, gaming app, march madness, Payroll, sports book
