Anna-Louise Jackson, Bankrate.com
The house always won gambling and soon it felt like Uncle Sam would do that too. That’s because gamblers face what is equivalent to the tax hikes that begin in 2026.
New rules included in the large tax bill signed into law in July will reduce the tax credits that gamblers can claim for losses between 100% and 90% starting next year.
Consider this: If a gambler wins $20,000 in the same year and loses $20,000, this tax change will affect how much of the losses they can deduct.
– In the 2025 tax year, taxpayers can deduct a loss of $20,000 before the new rules.
– From 2026 onwards, taxpayers can only deduct 90% of their losses ($18,000).
The gambler has become evenly flat, but changes to the tax law would increase taxable income by $2,000. Of course, the higher the stakes the gamblers have, the more important the tax increase becomes.
But gamblers may have luck on their side. Less than a month after President Donald Trump signed the bill, Republicans and Democrats drafted the law to rescind the tax change.
“There is ample concern that this provision may be reasonably revoked before it comes into effect,” said Kasey Pittman, managing director of tax services at accounting and advisory firm Cherry Bekaert.
That said, taxpayers should not bet on the House that this recent tax change will reverse, and instead have to prepare wagers to receive a different tax treatment starting next year. This is what you need to know.
What are the new tax rules for gambling losses?
Among the many tax-related changes contained in the massive “One Big Beautiful Bill” were short provisions that outlined “Expanding and Amendment of Betting Loss Limitations.”
The change is a bigger deal for gamblers than a short amount of text suggests.
From 2026 onwards, you can only claim deductions equivalent to 90% of your bet loss. This marks a change from current tax laws and allows gamblers to deduct 100% of their losses. What remains the same is that the amount of loss that can be deducted does not exceed the amount of profit.
Andrew L. Gradman, founder of APC’s Andrew L. Gradman law firm, said it was “harmful” for gamblers to reduce the amount of claimable losses from 100% to 90%.
It is worth noting that Republican lawmakers are already trying to repeal this tax law change. “It’s pure atrocity for gamblers,” says Gredman.
How to Report Gambling Profits and Losses
The tax rules for casual gamblers were already quite complicated, with rules that apply to lottery, raffles, horse racing, casinos, online bets, cash prizes and prize money from fair market value. The amount of money you can report is different amounts, whether you have achieved a big win in a slot machine or a poker tournament, for example, and will depend on how you win the money. (This is an IRS page about gambling income and losses.)
If gambling revenue meets a certain threshold, the payer must issue a form W-2G of prize money that is eligible for federal income tax withholding. That said, even those that didn’t require a tax form should report all gambling prizes.
However, gambling losses are treated differently. Taxpayers can only deduct gambling losses, itemize deductions, and keep records of prizes and losses. Furthermore, the amount of loss you deduct cannot exceed the amount of gambling income you report. This means that even if you are a net loser for that year, you can only claim losses up to the amount of your prize.
Gambling Loss: Standards and Itemized Deductions
When you’re sitting at a blackjack table, you may not think about your income tax. But whether you get the standard deduction or itemize the deduction, there are actually a big difference.
And the massive new tax bill permanently made much larger standard deductions created under the 2017 Tax Cuts and Employment Act, adding additional inflation boosts in 2025. So the standard deduction for 2025 is:
– $15,750 for filing married to a single filer
– Head of household $23,625
– $31,500 for married filing co-filer
Now, the larger standard deduction is permanent, putting many gamblers in distress. For the majority of taxpayers, taking the standard deduction makes more sense. However, you can only deduct gambling losses if you itemize the deduction. This means casual gamblers who receive standard deductions will tax “the worst treatment,” Gradman says.
Gambling income is included in total income, but casual gamblers who receive a standard deduction cannot claim losses, Gradman said. “The IRS has these people in Ratchet. Winning is taxable, but losses don’t alleviate those taxes,” he says.
In fact, tax laws discourage gamblers who make standard deductions because they don’t have profits from tracking losses, Gradman said.
Whether it makes sense for taxpayers to itemize deductions depends on many factors beyond betting profits and losses, Pittman points out. The new tax bill may also encourage some taxpayers to add items, thanks to a temporary boost to the salt (state and local tax) deduction limit from the previous $10,000 to $40,000.
Due to the various nuances of tax law, low-income casual gamblers are already much more likely to claim standard deductions, and continue to miss out on the opportunity to claim their losses, says Pittman. The Gambling Profit and Loss Tax Act has already been difficult to navigate due to the tax efficiency of the deduction, she adds. “It’s now more difficult since 2026,” she says.
Meanwhile, casual gamblers who itemize deductions are in a better position on the tax front, but they are still losing to changes in tax laws that reduce the amount of losses they can claim. Pittman adds that taxable income increases as gamblers are limited to charging only 90% of the amount of losses and only up to the total amount of profit.
How to manage gambling prizes and losses with tax changes
There is reason to be optimistic that gamblers can rewind what amounts to a bounty increase before it becomes effective in January, as evidenced by the protests against this provision in the tax bill. But passing a law to revoke an earlier law is not as easy as it looks, Pittman warns.
“People who may be affected by this law should want, but that’s certainly not something they should expect as a certainty,” Pittman says.
It is hard to see if the intention behind the regulations was to stop gambling, generate revenue, or combine both, but the nonpartisan Congressional Budget Office estimates it will raise more than $1.1 billion over a decade.
Gamblers should keep an eye on the developments heading into 2026, but there are ways to become tax-savvy when it comes to casinos and beyond.
For casual gamblers who get standard deductions, Gradman advises you on the following steps:
– Gambling activities for “sessions”. This could be a day at the casino.
—NET wins against losses within each session, so you will have a net income or net loss session left.
– Introducing the online income session and report this amount for the Gambling Awards on Form 1040, Schedule 1.
– Net-loss sessions will not benefit you, so you will see the net-loss session.
Casual gamblers who itemize deductions should take the same steps 1-3 as above, according to Gradman, and there are the following additional steps:
– Submit a net loss session and report the amount of this loss as “other itemized deductions” on Form 1040, Schedule A.
– Includes total losses from income session to total revenue.
And if you’re the type of person who thinks about tax efficiency while gambling, tax law can be a factor to consider when deciding whether to hold or fold an em on the table. That’s because they have some “perverse” incentives to continue playing and “throw bad money,” says Gredman.
Finally, many gamblers rely on casinos to report the amount of their winnings to the IRS. The new law could reduce the value of the losses and even less incentive for taxpayers to maintain records, but he adds that there could be a benefit in doing so.
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